Accounting, Financial Reporting and Regulatory Developments for Public Companies

Transcription

1 Accounting, Financial Reporting and Regulatory Developments for Public Companies SECOND QUARTER UPDATE 2017 The Quarterly Newsletter is a quarterly publication from EKS&H s Technical Accounting and Auditing Group. In the newsletter, we highlight some of the more important 2017 second quarter accounting, financial reporting, and regulatory activities. The content is not meant to be all inclusive. You can access prior Quarterly Newsletters at s Regulatory Update Disclosures Regarding Impact of New Standards As a reminder, SAB 74 (Topic 11.M) requires disclosures about new accounting standards that have not been adopted as of the date of the financial statements contained in an SEC filing. Specifically required transitional disclosures in MD&A and the financial statements include the following information to the extent the effects are known: Details of the new standard, the methods the company plans to adopt when implementing the principles and the date of planned adoption by the company. Details about the estimated effect of the guidance on the company s reporting or a statement detailing that the effect is not yet known or reasonably estimable. Any significant impacts of adoption on the company. SEC staff has indicated they will monitor disclosures about the expected effects of the new revenue, lease, financial instruments and credit losses standards in the coming year and investors should expect the level of transition disclosures to increase as a company progresses in its implementation plans. SEC staff expected companies to provide enhanced disclosures regarding the implementation of the new revenue standard beginning in their first quarter reporting. SEC staff has stated that if a registrant does not know or cannot reasonably estimate the effect the adoption of the above new standards will have on the entity s financial statements, it should make a statement to that effect and consider making the following qualitative disclosures: Compare the not-yet-adopted standard to current accounting policies of the entity. Discuss the status of the process to implement the new standard and the nature of any significant implementation matters not yet addressed. Discuss transition method elected or the status of the election. Provide any additional qualitative disclosures necessary to help financial statement users to understand the potential impact of the new standard on the entity s financial statements. The SEC expects this guidance to be followed for the 2017 quarterly financial statements and expects these disclosures to become more robust and quantitative each quarter. In a June 2017 speech, Wesley Bricker, SEC Chief Accountant, noted that the new revenue disclosures may require disclosure of different data and information than previously provided, which may potentially require updates to existing processes and controls. He encouraged companies to ensure the appropriate resources needed to plan and prepare these disclosures are being dedicated to the project. In an earlier speech in May, he also emphasized the importance of the new revenue disclosures and noted that preparing them may be one of the more challenging parts of implementation. He encouraged companies to not wait until the end of the year to address disclosures and to allocate proper time and resources. Mr. Bricker also noted in the June speech that many companies are devoting their resources to the revenue standard implementation. He suggested concurrent SECOND QUARTER UPDATE (PUBLIC COMPANY)

2 implementation planning for the lease, financial instruments and credit losses standards because of the number of complementary activities and upcoming effective dates. ICFR The new standards will require greater judgment when applying the guidance. Registrants should reassess the adequacy of current internal controls and identify and implement any changes. Management has a quarterly responsibility to report material changes to ICFR as well as material weaknesses. As companies transition to the new revenue standard as well as other new accounting standards and policies, resulting changes or the redesigning of controls may require disclosure in the Form 10-Q or Form 10-K. Management and audit committees should consider the disclosure requirements related to the establishment of new controls and processes related to the adoption of the new accounting standards. SEC staff has commented that boilerplate disclosure that there has been no material changes in ICFR should be avoided. Also, the transition disclosures required under Topic 11.M is subject to evaluation of effective ICFR. For example, new controls requiring disclosure in quarters prior to adoption of the new revenue standard may include the following: Controls related to monitoring of the new guidance adoption process (assessment and implementation process). Controls related to implementing a new IT system or adding new subsystems. Controls related to the actual adoption journal entries whether using a full retrospective (adjustments to prior year financial statements) or a modified retrospective (adjustments to beginning retained earnings) transition approach. Assessing, gathering, compiling and evaluating the data needed to support the required disclosures. In the June 2017 speech, Mr. Bricker noted that companies applying the new COSO framework for assessing ICFR might find its five components and related concepts and principles useful when developing an implementation approach and related documentation. Auditor Independence Management and auditors should discuss implementation of the new accounting standards. However, they should be mindful of potential challenges to maintaining auditor independence. It is important that management, and not the auditor, makes the final determination based upon its own analysis as to the accounting used, including determination of estimates and assumptions. The auditor should not design or implement accounting policies or controls. If these considerations are followed, auditor involvement as an input to management s process can be appropriate. The SEC has also highlighted the potential implications to ICFR when evaluating the required disclosures under SAB 74. Non-GAAP Measures We discussed the SEC s focus on non-gaap measures in 2016 Newsletters. As a reminder, the rules on non-gaap measures apply to proxy statements except for certain disclosures related to target levels in the Compensation Discussion & Analysis section. PCAOB Adopts Changes to Auditor s Reports On June 1, 2017, the PCAOB adopted a new auditing standard that would require auditors to include in the auditor s report a discussion of the critical audit matters (CAMs) which are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgement. Under the new standard, the auditor s report will disclose, among other things, the tenure of an auditor, and the phrase, whether due to error or fraud, in describing the auditor s responsibility under PCAOB standards to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The auditor s report will be required to (1) identify the CAM; (2) describe the principal considerations that led the auditor to determine the matter is a CAM; (3) describe how it was addressed in the audit; and (4) make reference to the relevant financial statement accounts and disclosures. If the auditor determines there are no CAM, the auditor must state so in the auditor s report. SECOND QUARTER UPDATE (PUBLIC COMPANY)

3 The Board approved a phased approach to the effective date for the new requirements as follows: s Accounting Guidance Issued in Second Quarter 2017 New auditor s report format, tenure, and other information: audits for fiscal years ending on or after December 15, 2017 Communication of CAMs for audits of large accelerated filers: audits for fiscal years ending on or after June 30, 2019 Communication of CAMs for audits of all other companies: audits for fiscal years ending on or after December 15, 2020 The final standard only applies to audits conducted under PCAOB standards. In addition, the communication of CAMs is not required for audits of emerging growth companies; brokers and dealers; investment companies other than business development companies; and employee stock purchase, savings, and similar plans. Accounting for Certain Financial Instruments with Down Round Features ASU , Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception, simplifies the accounting for certain financial instruments with down round features (a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings). The new rules are subject to approval by the SEC. SEC Expands Draft Registration Statements Eligible for Review on Non-Public Basis On June 29, 2017, the SEC announced that the Division of Corporation Finance will permit all companies to submit draft registration statements relating to initial public offerings (IPOs) for review on a non-public basis. This process will be available for IPOs as well as most offerings made in the first year after a company has entered the public reporting system. Down round features are found in many warrants, convertible preferred shares and convertible debt instruments. Under current accounting guidance, financial instruments with down round features are required, on an ongoing basis, to be measured at the fair value of the entire instrument (i.e.: warrant) or conversion option. The fair value is driven by changes in the value of a company s own share price, and does not reflect the economics of the down round feature, which exists to protect certain investors from declines in the issuer s share price under certain circumstances. This process which is similar to the benefit used by emerging growth companies (EGC) under the JOBS Act, will provide companies with more flexibility to plan their offering. The non-public review process after the IPO reduces the potential for lengthy exposure to market fluctuations that can adversely affect the offering process and harm existing public shareholders. By requiring a public filing period prior to the launch of marketing, the process incorporates a feature of the EGC review process that provides an opportunity for the public to evaluate those offerings. In addition, all companies may omit financial information that they reasonably believe will not be required at the time the registration statement is publicly filed from their initial registration statement submitted for confidential review. The new ASU requires companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature and will also recognize the effect of the trigger within equity. The effect will be treated as a dividend. The ASU also addresses navigational concerns within the FASB Accounting Standards Codification related to an indefinite deferral available to private companies with mandatorily redeemable financial instruments and certain noncontrolling interests. The deferral created significant pending content in the Codification. To address this concern, the Board decided to reclassify the indefinite deferral as a scope exception, which does not have an accounting effect. SECOND QUARTER UPDATE (PUBLIC COMPANY)

4 The amendments of the new ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, Early adoption is permitted for all organizations, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Modification Accounting for Stock Compensation ASU , Compensation Stock Compensation (Topic 718) Scope of Modification Accounting, applies to entities that change the terms or conditions of a sharebased payment award. Currently, the Master Glossary of the FASB Accounting Standards Codification defines the term modification as a change in any of the terms or conditions of a share-based payment award. Topic 718 does not contain guidance on what changes are substantive or purely administrative, resulting in diversity in accounting practice. The amendments should be applied in either of the following ways: 1. Modified respective - retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the Update is adopted. 2. Full retrospective - retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented. Note that the Update may be early adopted for interim financial statements in 2017; however, the impact of the adoption would be reflected as of January 1, 2017 (modified retrospective method) or January 1, 2016 (full retrospective if 2 year financial statements are included). Service Concession Arrangements ASU , Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, clarifies that the grantor in a service concession arrangement is the customer of the operation services in all cases for those arrangements. An example follows: A government entity grantor enters into an arrangement with an operating entity under which the operating entity will provide operation services, including operation and general maintenance of the infrastructure, for a toll road that will be used by third-party users (drivers). This new guidance clarifies that the grantor (government), rather than the third-party drivers, is the customer of the operation services in all cases for service concession arrangements within the scope of Topic 853. The amendments include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. Under these amendments, an entity is not required to account for the effects of a modification if all three of the following conditions are the same immediately before and after the modification: Fair value (or calculated value or intrinsic value, if such an alternative measurement method is used); Vesting conditions of the award; Classification as an equity instrument or a liability instrument. Entities are still required to disclose all significant modifications, even if modification accounting is not required. The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, The amendments should be applied prospectively to an award modified on or after the adoption date. The guidance can be early adopted for modifications not previously reported in financial statements that have not been issued or been made available for issuance. The amendment is effective at the same time as Topic 606, Revenue from Contracts with Customers. SECOND QUARTER UPDATE (PUBLIC COMPANY)

5 s Other Quarterly Reminders Management Responsibility to Evaluate Going Concern ASU , Presentation of Financial Statements- Going Concern (Subtopic ): Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern, was effective for all calendar-year companies in Under the guidance, management is required to evaluate whether there are conditions or events that raise substantial doubt about the entity s ability to continue as a going concern for a period of one year from the date the financial statements are issued and to provide appropriate disclosures. Should management s plan alleviate this concern, the measures to be taken should also be disclosed. The guidance provides management with principles for evaluating whether there is substantial doubt and how the underlying conditions and events should be disclosed in the notes to the financial statements. As a reminder, public business entities must perform this evaluation quarterly. The assessment period is one year from the date the financial statements are issued. This requires management to consider cash flow needs over the next 12 months and may necessitate revising budgeting processes to cover the period. For example, assume the company s first quarter financial statements are issued May 15, Management s assessment, at a minimum, would cover the period through May 15, Adoption Relief for Certain Companies for New Revenue and Lease Standards In 2013, the FASB issued guidance defining a public business entity (PBE). The definition of a PBE includes business entities that file or furnish financial statements with the SEC and this includes entities whose financial statements or financial information are included in a filing with the SEC. Under this definition, some entities that are not SEC registrants, such as a registrant s equity method investees that are significant under Regulation S-X Rule 3-09 or 4-08(g) or entities acquired that are significant under S-X Rule 3-05, are considered PBEs because their financial statements or financial information are included in the registrant s SEC filing. In those cases, the entity is only a PBE for purposes of the financial statements or financial information included in the SEC filing. For example, a registrant may have a significant equity method investment in a private company that it accounts for under the equity method of accounting. The equity method investee s financial statements may be required to be included in the registrant s filings under Rule 3-09 because the investee is significant to the registrant. Alternatively, certain financial information about the investee may be required to be included in the registrant s filings under Rule 4-08(g) depending on significance. For another example, a registrant may acquire a private company that is significant and include the acquiree s audited financial statements in its filing under Rule In the three examples, the investee meets the definition of a PBE. Whether an entity is a PBE can have a significant impact on financial reporting, particularly since certain FASB guidance, including the new revenue and lease standards, have different effective dates for PBEs. In a May 2016 speech, the SEC stressed that registrants must ensure that all investee entities or acquired entities that meet the definition of a PBE adopt the new guidance using the effective dates for PBEs for purposes of the financial statements or financial information included in a filing with the SEC. However, in response to concerns, the SEC staff provided significant relief at the July 20, 2017 EITF meeting. Specifically, businesses that do not meet the definition of a PBE aside from the fact that they have to include their financial statements or financial information with the financial statements of other public companies can have more time to adopt the revenue recognition and lease accounting standards. The SEC will not object to these companies adopting these new standards at the same time as non-pbes (private companies). Note that adoption relief was not given for any other new standards. Relief was not required for the new credit loss and financial instruments standards because the effective dates are specified as different for SEC Filers (not PBEs) and other companies. In performing certain significant tests required by Regulation S-X, the registrant should use financial information prepared by these PBEs that apply non- PBE adoption dates when performing the significance tests. However, if pro forma financial information is being prepared under Regulation S-X, Article 11, for an acquisition of a significant business, the registrant, following its adoption of the revenue and/or lease standards, must still conform the acquiree s transition dates and methods of adoption to its own in the pro forma presentation for the periods after its adoption. SECOND QUARTER UPDATE (PUBLIC COMPANY)

6 s AICPA Cybersecurity Framework s Update on New Revenue Recognition Rules The AICPA recently introduced a voluntary cybersecurity risk management reporting framework. The voluntary framework will assist organizations in their approach to the risk as well as communication with stakeholders. The purpose of the framework is to enable investors, boards, audit committees and business partners to gain a better understanding of an organization s cybersecurity risk management efforts. The framework can be used both internally by management to develop and evaluate risk management and externally by stakeholders to understand those management efforts. As a reminder, the new standard is effective in 2018 for calendar-year public companies and companies can adopt using a full retrospective or cumulative effect adoption method (modified retrospective option). As of June 30, 2017, there are no outstanding exposure drafts or ongoing deliberations related to the revenue standard. As discussed in previous Newsletters, the TRG was formed to review implementation issues and bring issues to the FASB s attention if further amendments to the guidance were deemed necessary. The TRG has no additional meetings scheduled. The FASB encourages companies to submit questions to the FASB staff through the technical inquiry process and it will continue to assess whether it is necessary to schedule future TRG meetings. The FASB plans to perform additional outreach to preparers and other stakeholders related to the accounting for pre-production activities. Based on this outreach, the FASB will then assess whether any future standard setting is required on this specific topic. The AICPA formed sixteen industry task forces to help develop a new Accounting Guide on Revenue Recognition that will provide helpful hints and illustrative examples for how to apply the new revenue standard. The industry task forces continue to discuss industry-specific implementation issues, and have released various working drafts of industry guidance, which are available for public comment on the AICPA website. See earlier discussion related to SAB 74 disclosures, ICFR and auditor independence. SECOND QUARTER UPDATE (PUBLIC COMPANY)

7 s Standards Issued in 2017 Update Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception Update Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services Update Compensation Stock Compensation (Topic 718): Scope of Modification Accounting Update Receivables Nonrefundable Fees and Other Costs (Subtopic ), Premium Amortization on Purchased Callable Debt Securities Update Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost Update Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting Update Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic ): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets Update Intangibles Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Update Accounting Changes and Error Corrections (Topic 250) and Investments Equity Method and Joint Ventures (Topic 323) N/A December 15, 2019, and interim periods beginning after December 15, beginning after December 15, 2018, and Fiscal years beginning after December 15, December 15, 2019, and interim periods beginning after December 15, beginning after December 15, 2018, and beginning after December 15, 2017, and Fiscal years beginning after December 15, December 15, Public business entities that are SEC filers: fiscal years beginning after All other public business entities: fiscal years beginning after December 15, Upon issuance. SECOND QUARTER UPDATE (PUBLIC COMPANY)

8 s Standards Issued in 2017 (continued) Update Not-for-Profit Entities Consolidation (Subtopic ): Clarifying When a Not-for-Profit Entity That is a General Partner or a Limited Partner Should Consolidate a For-Profit Limited Partnership or Similar Entity Update Business Combinations (Topic 805): Clarifying the Definition of a Business Fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, If ASU has not been adopted, must adopt both at same time. December 15, beginning after December 15, 2017, and SECOND QUARTER UPDATE (PUBLIC COMPANY)

9 s Standards Issued in Prior Years Effective 2017 or After Update No Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Update No Technical Corrections and Improvements Update No Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) Update No Consolidation (Topic 810): Interests Held through Related Parties that are Under Common Control Update No Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory Most amendments effective immediately. Six of the amendments provide specific transition guidance and allow for early adoption. beginning after December 15, 2017, and December 15, 2016, and interim periods December 15, Must adopt ASU at same time.* beginning after December 15, 2016, and ** beginning after December 15, 2017, including Update No Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) Update No Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities beginning after December 15, 2017, and Nonpublic companies only: annual financial statements issued for fiscal years beginning after December 15, 2017, and interim periods December 15, * Effective 2017 for nonpublic companies ** Effective 2017 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

10 s Standards Issued in Prior Years Effective 2017 or After (continued) Update No Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Update No Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients Update No Rescission of SEC Guidance Because of Accounting Standards Updates and Pursuant to Staff Announcements at March 3, 2016 EITF meeting Update No Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Update No Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Update No Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Update No Investments Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting Update No Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years See ASUs and Nonpublic (including not-for-profit entities and employee benefit plans): fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, Public business entities that are SEC filers: fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other public business entities: fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. See ASUs and December 15, 2017, and interim periods December 15, beginning after December 15, 2016, including interim periods within those fiscal years. ** Annual periods and interim periods within those periods, beginning after December 15, * ** December 15, 2017, and interim periods December 15, beginning after December 15, 2016, including interim periods within those fiscal years. ** * Effective 2017 for nonpublic companies ** Effective 2017 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

11 s Standards Issued in Prior Years Effective 2017 or After (continued) Update No Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships Update No Liabilities Extinguishments of Liabilities (Subtopic ): Recognition of Breakage for Certain Prepaid Stored-Value Products Update No Leases (Topic 842) Update No Financial Instruments Overall (Subtopic ): Recognition and Measurement of Financial Assets and Financial Liabilities Update No Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes Update No Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, for certain amendments December 15, 2017, and interim periods December 15, beginning after December 15, 2016, including interim periods within those fiscal years. ** Public business entities, certain not-for-profit entities and certain employee benefit plans: fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. December 15, 2019, and interim periods December 15, beginning after December 15, 2018, including interim periods within those fiscal years. beginning after December 15, 2017, including interim periods within those fiscal years. December 15, 2017, and interim periods December 15, beginning after December 15, 2016, including interim periods within those fiscal years. ** Can be applied prospectively or retrospectively. December 15, 2016, and interim periods December 15, * beginning after December 15, 2015, including interim periods within those fiscal years. * Effective 2017 for nonpublic companies ** Effective 2017 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

12 s Standards Issued in Prior Years Effective 2017 or After (continued) Update No Revenue from Contracts with Customers (Topic 606): Deferral of the Update No Inventory (Topic 330): Simplifying the Measurement of Inventory Update No Financial Services- Insurance (Topic 944): Disclosures about Short- Duration Contracts Update No Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) Update No Compensation - Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer s Defined Benefit Obligation and Plan Assets Update No Consolidation (Topic 810): Amendments to the Consolidation Analysis, under certain circumstances Nonpublic: apply the guidance in ASU to fiscal years beginning after after Public business entities, certain not-for-profit entities, and certain employee benefit plans: apply the guidance in ASU to fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. December 15, 2016, and interim periods December 15, * beginning after December 15, 2016, and ** December 15, 2016, and interim periods December 15, * beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, Nonpublic: fiscal years, and interim periods within those fiscal years, beginning after December 15, *, and interim periods within those fiscal years, beginning after December 15, December 15, 2016, and interim periods December 15, *, and interim periods within those fiscal years, beginning after December 15, December 15, 2016, and interim periods December 15, *, and interim periods within those fiscal years, beginning after December 15, * Effective 2017 for nonpublic companies ** Effective 2017 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

13 s Standards Issued in Prior Years Effective 2017 or After (continued) Update No Consolidation (Topic 810) - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity Update No Revenue from Contracts with Customers (Topic 606) Nonpublic: fiscal years, and interim periods within those years, beginning after December 15, *, and interim periods within those years, beginning after December 15, * Effective 2017 for nonpublic companies ** Effective 2017 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)