Quarterly financial reporting update

Transcription

1 Quarterly financial reporting update Wednesday, December 20, :00 1:00 pm CT We will be starting soon Please disable pop-up blocking software before viewing this webcast

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4 Quarterly financial reporting update Wednesday, December 20, :00 1:00 pm CT We will be starting soon Please disable pop-up blocking software before viewing this webcast

5 Speakers Rahul Gupta Partner Accounting Principles Sheri Fabian Partner Accounting Principles Marjorie Whittaker Senior Manager SEC Regulatory Matters Julia Siegfriedt-Wilson Manager Accounting Principles

6 Learning objectives Describe the current status of standard-setting projects Recognize the potential impact of recently issued standards on your company Identify recent news and events that may affect financial reporting 6

7 Agenda Recently issued guidance/rules Recently proposed guidance Practice issues Other news and developments Q considerations 7

8 Recently issued guidance/rules

9 New ASUs from FASB ASU Title Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) (SEC Update) U.S. Steamship Entities: Elimination of Topic 995 9

10 SEC interpretive guidance regarding pay ratio disclosures Final rule Amended S-K Item 402 to require the following disclosures: Median of the annual total compensation of all employees, except CEO Annual total compensation of the CEO Ratio of these two amounts Effective for fiscal years beginning on or after January 1, 2017 Recent interpretive guidance Commission's interpretive guidance CorpFin staff guidance on calculation of pay ratio disclosure Regulation S-K C&DIs, Section 128C, Item 402(u), Pay Ratio Disclosure

11 Recently proposed guidance

12 Proposed ASUs from FASB Project Comments due Land Easement Practical Expedient for Transition to Topic /25/17 Technical Corrections and Improvements to Recently Issued Standards: I. Accounting Standards Update No , Financial Instruments Overall (Subtopic ): Recognition and Measurement of Financial Assets and Financial Liabilities II. Accounting Standards Update No , Leases (Topic 842) 11/13/17 Consolidation (Topic 812) Reorganization 12/04/17 Codification Improvements 12/04/17 12

13 Proposed rule fast act modernization and simplification of regulation S-K Mandated by the FAST Act Improve readability and navigability Discourage repetition and disclosure of immaterial information Proposed amendments include Property disclosures MD&A Exhibits Facilitate investors' access to information through technology Cover page data tags Hyperlinks 13

14 Practice issues

15 Presentation of discontinued operations in a classified balance sheet Are there circumstances in which it is appropriate to classify assets and liabilities of the discontinued operation as current? ASC In the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the statement of financial position 15

16 Presentation of discontinued operations in a classified balance sheet Should the reporting entity present assets and liabilities as current and noncurrent? Should changes be made to the prior comparative-period classifications of assets and liabilities now that the held-forsale criteria are met? How should the entity determine which assets should be classified as current? 16

17 Presentation of discontinued operations in a classified balance sheet Current assets held-for-sale Noncurrent assets held-for-sale Current liabilities held-for-sale Noncurrent liabilities held-for-sale 17

18 Presentation of discontinued operations in a classified balance sheet If it is probable that the sale will occur within one year AND sale is expected to qualify for recognition as a completed sale: Current period balance sheet Current assets Current liabilities Prior comparative periods Current assets Noncurrent assets Current liabilities Noncurrent liabilities 12 18

19 Evaluating "commensurate" of commissions under ASC Example: Company A enters into a one-year renewable SAAS contract for $100,000 per year The commission structure payable to Company A s employee for the contract is: 10% of the total contract price paid upon contract signing ($10,000) 2% paid on day 1 of year 2 and beyond if renewed ($2,000 per year) Assume four renewals for a total of five years What portion(s) of the commission must be capitalized on day one? 19

20 Evaluating amortization period for capitalized commissions What is the amortization period for capitalized commissions? View A Amortize the 10% ($10,000) over the initial one-year contract period plus the estimated renewal periods (5 years) Amortize each capitalized renewal of 2% over the respective renewal period Year 1 Year 2 Year 3 Year 4 Year 5 Initial commission $2,000 $2,000 $2,000 $2,000 $2,000 Renewal commissions $2,000 $2,000 $2,000 $2,000 Total expense (amortization) $2,000 $4,000 $4,000 $4,000 $4,000 20

21 Evaluating amortization period for capitalized commissions What is the amortization period for capitalized commissions? View B Amortize the amount of the initial commission that is determined to be incremental to the renewal commission (8%, or $8,000) over 5 years Amortize the remaining amount (2%) over the one-year initial contract period Year 1 Year 2 Year 3 Year 4 Year 5 Incremental initial commission $1,600 $1,600 $1,600 $1,600 $1,600 Commensurate commission $2,000 Renewal commissions $2,000 $2,000 $2,000 $2,000 Total expense (amortization) $3,600 $3,600 $3,600 $3,600 $3,600 21

22 Financial reporting manual update Transition issues related to adoption of new accounting standards Adoption date when an EGC that has elected private company adoption dates ceases to qualify as an EGC Pro forma financial information for a significant business combination when the acquired entity adopts a new accounting standard using a different transition method or adoption date 22

23 CAQ SEC Regulations Committee September 2017 Meeting Highlights Effects of accounting changes by a successor entity on the predecessor period financial statements Clarification on form eligibility and financial statements that may be omitted from draft registration statements submitted for non-public review Other transactions included in pro forma financial information for a business combination under common control or discontinued operations 23

24 Other news and developments

25 ASC 842: Transition approach Public business entities: Earliest period presented date 1/1/17 Cumulative Effect OR Effective date 1/1/ Current GAAP New GAAP 25

26 Lessors - Components of a contract Practical expedient to not separate non-lease components from the related lease component when: Timing and pattern of revenue recognition is the same The combined lease component is classified as an operating lease Additional disclosures Election of practical expedient Class or classes of underlying assets to which expedient applies Nature of the non-lease components included within the single lease component 26

27 ASC 606: Upfront franchise fees Are some or all of the pre-opening activities distinct? No Yes Include initial fee in the transaction price for the combined performance obligation and recognize over the license period Allocate a portion of the transaction price to that performance obligation and recognize revenue when (or as) services are performed 27

28 Tax reform: Accounting considerations Recognition of tax impact in income statement Remeasurement of deferred tax assets and liabilities Earnings in Foreign Subsidiaries Valuation allowances Disclosures 28

29 Q considerations

30 Standards that become effective for public business entities in Q ASU Title Various Revenue from Contracts with Customers (ASC 606 and ) Recognition and Measurement of Financial Assets and Financial Liabilities Recognition of Breakage for Certain Prepaid Stored-Value Products a consensus of the FASB Emerging Issues Task Force (ASC , Liabilities Extinguishment of Liabilities) Presentation of Financial Statements of Not-for-Profit Entities (ASC 958, Notfor-Profit Entities) Classification of Certain Cash Receipts and Cash Payments a consensus of the FASB Emerging Issues Task Force (ASC 230, Statement of Cash Flows) 30

31 Standards that become effective for public business entities in Q ASU Title Intra-Entity Transfers of Assets Other Than Inventory (ASC 740, Income Taxes) Restricted Cash a consensus of the FASB Emerging Issues Task Force Clarifying the Definition of a Business (ASC 805, Business Combinations) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost Scope of Modification Accounting (ASC 718, Compensation Stock Compensation) 31

32 Standards that impact 2017 financial statements of nonpublic entities ASU Title Presentation of Financial Statements Going Concern Amendments to the Consolidation Analysis Practical Expedient for the Measurement Date of an Employer s Defined Benefit Obligation and Plan Assets Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) a consensus of the FASB EITF Disclosures about Short-Duration Contracts Simplifying the Measurement of Inventory Simplifying the Accounting for Measurement-Period Adjustments (ASC 805, Business Combinations) Simplifying the Transition to the Equity Method of Accounting 32

33 Disaggregation of revenue Disclosure requirement Public All other Categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors Sufficient information to enable users to understand the relationship with revenue information disclosed under ASC 280, Segment Reporting Revenue disaggregated according to the timing of transfer of goods or services Qualitative information about how economic factors affect the nature, amount, timing and uncertainty of revenue and cash flows X X X X 33

34 Implementation guidance on disaggregated revenue disclosures When selecting categories, consider Earnings releases, annual reports, investor presentations Information regularly reviewed by the CODM Segment disclosure, MD&A, etc. Examples of categories could be Type of good or service Geographical region Market or type of customer Type of contract Contract duration Timing of transfer of goods or services Sales channels 34

35 Example 41 Disaggregated revenue quantitative disclosure 35

36 Remaining performance obligations Disclosure requirement Public All other The aggregate amount of the transaction price allocated to the remaining performance obligations at the end of the period (including those partially satisfied) "contract backlog" The entity's estimate for when the amount is expected to be recognized as revenue, either quantitatively or qualitatively Disclosures above not required if any of the below applies: The contract has an expected duration of 1 year or less The entity recognizes revenue using the "right to invoice" method Variable consideration is a sales-based or usage-based royalty in exchange for a license of IP Variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation X X 36

37 SAB 74 disclosures Do the disclosures say what they company knows? What if the company says it is still evaluating? What will our auditors be looking for? 37

38 Any final questions?

39 Disclaimer This Grant Thornton LLP presentation is not a comprehensive analysis of the subject matters covered and may include proposed guidance that is subject to change before it is issued in final form. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this presentation. The views and interpretations expressed in the presentation are those of the presenters and the presentation is not intended to provide accounting or other advice or guidance with respect to the matters covered For additional information on matters covered in this presentation, contact your Grant Thornton LLP adviser

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