GAAP Update. MI IASA 2015 Fall Conference

Transcription

1 GAAP Update MI IASA 2015 Fall Conference Agenda Accounting Standards Updates (ASUs) Issued GAAP Insurance Updates Employee Benefit Plans Updates Updates on Known and Anticipated Projects 1

2 GAAP Guidance Effective in 2015 ASU Description Not-for-Profit Entities: Services Received from Personnel of an Affiliate Investments Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Intangibles Goodwill and Other: Accounting for Goodwill (Private Company Council) Derivatives and Hedging: Accounting for Certain Interest Rate Swaps (Private Company Council) Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ( ) Revenue From Contracts with Customers Development Stage Entities: Elimination of Certain Financial Reporting Requirements Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures Stock Based Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved After the Requisite Service Period Receivables Troubled Debt Restructuring by Creditors Presentation of Financial Statements Going Concern: Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern GAAP Guidance 2

3 GAAP Guidance Released in 2015 ASU Description Income Statement Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items Consolidation: Amendments to the Consolidation Analysis Interest Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs Compensation Retirement Benefits: Practical Expedient for the Measurement Date of an Employer s Defined Benefit Obligation and Plan Assets Intangibles Goodwill and Other Internal Use Software: Customer s Accounting for Fees Paid in a Cloud Computing Arrangement Earnings Per Share: Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions Fair Value Measurement: Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share Business Combinations: Pushdown Accounting Financial Services Insurance: Disclosures about Short-Duration Contracts GAAP Guidance Released in 2015 ASU Description Technical Corrections and Improvements Inventory: Simplifying the Measurement of Inventory Plan Accounting: Defined Benefit Pension Plans, Defined Contribution Pension Plans, Health and Welfare Benefit Plans Fully Benefit-Responsive Investment Contracts, Plan Investment Disclosures, Measurement Date Practical Expedient Derivatives and Hedging: Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets Revenue From Contracts With Customers Interest Imputation of Interest, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements 3

4 GAAP Insurance Update Short duration contracts (ASU ) Enhancing and expanding loss disclosures Newly required loss disclosures include: o Undiscounted incurred and paid claims development tables by accident year o Incurred but not reported o A reconciliation of the incurred claim development tables to the liability for unpaid losses and LAE o Cumulative claims frequency information o Description of the methodologies used to calculate IBNR o Information about discounted unpaid losses and LAE o Historical average annual payout percentages GAAP Insurance Update Short duration contracts (ASU ) continued Effect on SAP Comparison with IFRS 4

5 GAAP Insurance Update Long duration contracts The Board is continuing discussion on specific methods that should be used to determine the liability for future policy benefits for traditional long-duration and limited-payment contracts. o Specifically looking at universal life products Other possible updates: assumptions, discount rate, premium deficiency and loss recognition and amortization of deferred acquisition costs No timeline Employee Benefit Plans Update Compensation Retirement Benefits (ASU ) Practical expedient for the Measurement Date Reporting entity with fiscal year-end that does not coincide with a month-end of a plan asset o A practical expedient that permits the entity to measure plan assets of EBPs and obligations using the month-end that is closest to the entity s fiscal year-end o Apply the practical expedient consistently from year to year and between all plans o Adjust the measurement of the plan asset to reflect any significant events but do not adjust measurement if change is not caused by the entity 5

6 Employee Benefit Plans Update Plan Accounting (ASU ) Fully Benefit-Responsive Investment Contracts o Affects defined contribution and health and welfare plans o Currently reported at contract value by the issuer because contract value is what the participant would receive at liquidation. GAAP requires investments reported at FV. On the 5500, these investments are reported at contract value so there is a reconciliation from the 5500 to financials o Change: the holdings would be recorded at the contract value with no adjustment to the financials. Change in GAAP Employee Benefit Plans Update Plan Accounting (ASU ) continued Plan Investment Disclosures o Eliminates the disclosure of individual investments that represent 5% or more of net assets and the net appreciation or depreciation for investments by general type (in the aggregate is still required) 6

7 Employee Benefit Plans Update Investments that calculate NAV per share, or its equivalent (ASU ) Includes investments using a practical expedient Removal from FV hierarchy disclosure table o Effective for fiscal years beginning after for public companies, for all other entities. Early adoption is permitted Employee Benefit Plans Update Society of Actuaries Updated Mortality Tables and Improved Scale 11 updated mortality tables (RP-2014) vs. old tables (2014) Tables released October 2014 US GAAP required best estimate o Unique demographics or mortality experience the opportunity to use custom mortality assumptions RP-2014 tables do not effect the minimum funding for the 2014 and 2015 plan years 7

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10 Financial Instruments Classification & Measurement o Proposed: changes in fair value for equity securities that are considered available-for-sale would be recorded under net income, rather than through other comprehensive income Impairment o Proposed: current expected credit loss model o FASB indicated that this would affect accounts receivable and notes receivable Hedging Leasing Clarify the definition of a lease All leases will be recorded on the balance sheet o Type A Lease: most similar to capital lease Recognize a right-of-use asset Recognize lease liability On the income statement, recognize separately: interest expense and amortization of the right-of-use asset o Type B Lease: most similar to operating lease Recognize a right-of-use asset Recognize lease liability On the income statement, recognize a single lease expense 10

11 Simplification Initiatives Debt classification Share based payments Classification of deferred taxes Disclosure requirements Private Company Council 11

12 Private Company Council Issued Guidance ASU : Intangibles Goodwill and Other: Accounting for Goodwill ASU : Derivatives and Hedging: Accounting for Certain Interest Rate Swaps ASU : Consolidation: Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements ASU : Business Combinations: Accounting for Identifiable Intangible Assets in a Business Combination Private Company Council Future Projects Definition of a Public Business Entity Compiling feedback to identify additional areas in which to provide relief 12

13 Convergence Convergence Status of Convergence with IFRS AICPA: considers IASB a standard-setter FASB and IASB converged on the revenue recognition standard, but split on financial instruments and likely to split on leases IFRS for Small and Medium Sized Entities is considered a special purpose framework SEC: has been fairly silent on convergence, but certain comments hint that the SEC might be considering letting public filers choose to use IFRS, though it is not likely it would be required 13

14 Questions / Comments? Contact Information Nick Ehrlich, CPA Johnson Lambert LLP Senior Manager (847) nehrlich@johnsonlambert.com Heidi DeVette, CPA Johnson Lambert LLP Manager (847) hdevette@johnsonlambert.com 14