September Deloitte Czech Republic. Accounting news Czech Accounting, IFRS and US GAAP. Tax news Direct, indirect and other taxation

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1 Accounting news, IFRS and US GAAP Tax news Direct, indirect and other taxation Legal news Leasing Premises Used for Business Purposes Grants & Incentives news News from grants and incentives area Deloitte Czech Republic ICT news Opening Data Together Competition Risk Management Experience from Audits of Subsidised Projects (part 8)

2 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Accounting news Deloitte Czech Republic US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

3 Accounting news Cash-pooling and its Reporting Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Definitions Cash-pooling is an instrument used to optimise corporate accounts. Companies typically use a number of current accounts and cash-pooling gives them the opportunity to consolidate these bank accounts into a master account and accrue interest on a daily basis as a whole. The overriding benefit is that companies have the ability to avoid interest being charged on current accounts where the negative balance of an overdraft account is offset by a positive balance on another bank account. Obviously, cash-pooling does not necessarily serve only companies that have multiple bank accounts but also group companies to manage funding within the whole group. Banks typically offer their corporate clients physical cash-pooling where the balances of all accounts physically transfer to one account that has been designated as the master account, or notional cash-pooling that makes it possible to achieve the same effect of interest optimisation as with physical cash-pooling, without the need to physically transfer account balances. Accounting Aspects What are the accounting implications of using cash-pooling? Notional cashpooling does not result in physical transfers of cash balances and, for this reason, this cash-pooling form has no accounting implications. By contrast, physical cash-pooling poses a question as to whether the company does or does not have, at any point of time, the ability to touch its money that was transferred to the master account. In the vast majority of cases, the group conditions will be set such that physical cash-pooling will de facto represent an intercompany loan and hence the cash-pooling account balance will not be reported as part of Bank accounts or Short-term bank loans but as a component of intercompany receivables or payables, ie in balance sheet lines C.III.2 Receivables - controlled or controlling entity or B. III.2 Payables - controlled or controlling entity. Similarly, in the cash flow statement, if the company does not have the ability to handle the funding on the cash-pooling account, the cash-pooling account will not be included in cash and cash equivalents but rather as part of the Cash flow from financial activities section. 2 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

4 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Legislative Requirements for Cash-pooling Reporting Certain cash-pooling transactions can be subject to reporting to the Czech National Bank (the CNB ) based on Regulation 235/2013 Coll., on Reporting to the CNB by Statistically Significant Reporting Entities for the Purpose of Preparing Cross-Border Payment Balance, Investment Position and Debt Service. This Regulation defines the number of reporting entities that are required to provide the CNB with the reports defined in the appendices to the Regulation. The reporting entity is defined as an entity: a. That is a local investor with a direct investment abroad and the amount of its investment in the business of a foreign entity or the volume of loans provided or received as part of its direct investment abroad at the calendar year-end amounts to no less than CZK 2.5 million; b. That is a local company with a direct investment of a foreign investor and the amount of the foreign investor s investment in the business of the local company or the volume of loans provided or received as part of the direct investment in the Czech Republic at the calendar year-end amounts to no less than CZK 25 million; c. Whose total annual volume of assets or liabilities in relation to abroad amounts to no less than CZK 200 million at the calendar year-end; or d. Whose total annual volume of financial loans provided or received in relation to abroad at the calendar year-end amounts to no less than CZK 100 million. If a company determines that its form of cash-pooling represents an intercompany loan (physical cash-pooling) and conducts the cashpooling transactions with foreign group companies, then it should, upon reaching the limit of CZK 100 million, prepare report PB (CNB) Financial Loans and Accounts Abroad at the end of each calendar month and send it to the CNB by no later than the 25th day of the following month. This 2013 regulation has rendered null and void Regulation 34/2003 Coll., which established the scope, period, timing and method of complying with the reporting obligations under the Foreign Currencies Act. Section 5 of the previous regulation of 2003 provided an exemption from the reporting obligation in respect of cash-pooling. Unfortunately, the new Regulation 235/2013 Coll. no longer includes such exemption. 3

5 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Invitation to a Seminar News in Prague, Brno, Ostrava We would like to invite you to Deloitte s traditional autumn seminar on the news in Czech accounting providing a summary on accounting legislation and legal and tax news having an impact on companies financial statements. The seminar is predominantly intended for accountants, economists and financial managers preparing or involved in the preparation of financial statements under Czech accounting legislation and the related tax and legal regulations and for all of you who want to learn more about Czech accounting and the latest tax and legal developments. Seminars will be held in Czech in November and December in Prague, Brno and Ostrava and will be delivered by our professionals. Timing Prague: 11 November 2014 and 10 December 2014 Brno: 19 November 2014 Ostrava: 11 December 2014 More information on: 4 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

6 Accounting news IASB published final version of IFRS 9 Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals On 24 July 2014, the International Accounting Standards Board (IASB) published the final version of IFRS 9 Financial Instruments. This new standard supersedes all previous versions of IFRS 9. Background The IASB s project to replace IAS 39 Financial Instruments: Recognition and Measurement started in 2008 and has been completed in the following phases: 1. The IASB first issued IFRS 9 in 2009 with a new classification and measurement model for financial assets (see our Accounting newsletter from December 2009 for more information). 2. Requirements for financial liabilities and derecognition were added in 2010 (see our Accounting newsletter from November 2010 for more information). 3. Subsequently, IFRS 9 was amended in 2013 to add new general hedge accounting requirements (see our Accounting newsletter from December 2013 for more information). 4. This final version of IFRS 9 issued in July 2014 supersedes all previous versions of IFRS 9 and: a. adds a new expected loss impairment model and b. amends the classification and measurement model for financial assets by: i. adding a new fair value through other comprehensive income (FVTOCI) category for certain debt instruments and ii. additional guidance on how to apply the business model and contractual cash flow characteristics test. Summary of key requirements Expected loss impairment model IFRS 9 introduces a new impairment model based on expected losses, rather than incurred loss as applied in IAS 39. The measurement basis differs from IAS 39 as does the scope to which the impairment applies. Scope The new impairment model applies to all of the following: Financial assets measured at amortised cost; Financial assets mandatorily measured at fair value through other comprehensive income (FVTOCI) - see below; Loan commitments when there is a present obligation to extend credit (except where these are measured at fair value through profit and loss (FVTPL)); Financial guarantee contracts to which IFRS 9 is applied (except those measured at FVTPL); Lease receivables within the scope of IAS 17 Leases; and Contract assets within the scope of IFRS 15 Revenue from Contracts with Customers (ie rights to consideration following the transfer of goods or services). Note: IFRS 9 requires the same measurement basis for impairment for all items in the scope of the impairment requirements. This differs from IAS 39 where impairment was calculated differently for amortised cost assets and those available-for-sale assets measured at FVTOCI. Furthermore, IFRS 9 applies the same measurement approach to certain loan commitments and financial guarantee contracts where previously these were measured differently in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. 5

7 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals General Approach With the exception of purchased or originated credit impaired financial assets (see below), expected credit losses are required to be measured through a loss allowance at an amount equal to: the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument). A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition, as well as to contract assets or trade receivables that do not constitute a financing transaction in accordance with IFRS 15. Additionally, entities can elect an accounting policy to recognise full lifetime expected losses for all contract assets and/or all trade receivables that do constitute a financing transaction in accordance with IFRS 15. The same election is also separately permitted for lease receivables. For all other financial instruments, expected credit losses are measured at an amount equal to the 12-month expected credit losses. Significant increase in credit risk With the exception of purchased or originated credit-impaired financial assets (see below), the loss allowance for financial instruments is measured at an amount equal to lifetime expected losses if the credit risk of a financial instrument has increased significantly since initial recognition, unless the credit risk of the financial instrument is low (eg investment grade) at the reporting date in which case it can be assumed that credit risk on the financial instrument has not increased significantly since initial recognition. The assessment of whether there has been a significant increase in credit risk is based on an increase in the probability of a default occurring since initial recognition. The requirements also contain a rebuttable presumption that the credit risk has increased significantly when contractual payments are more than 30 days past due. IFRS 9 also requires that (other than for purchased or originated credit impaired financial instruments) if a significant increase in credit risk that had taken place since initial recognition and has reversed by a subsequent reporting period (ie, cumulatively credit risk is not significantly higher than at initial recognition) then the expected credit losses on the financial instrument revert to being measured based on an amount equal to the 12-month expected credit losses. 6

8 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Purchased or originated credit-impaired financial assets Purchased or originated credit-impaired financial assets are treated differently because the asset is credit-impaired at initial recognition. For these assets, the estimated cash flows used to calculate the (creditadjusted) effective interest rate at initial recognition incorporate lifetime expected credit losses. Subsequently, any changes in expected losses are recognised as a loss allowance with a corresponding gain or loss recognised in profit or loss. Credit-impaired financial asset Under IFRS 9, a financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. IFRS 9 includes examples of events which may bring evidence that a financial asset is credit-impaired. Basis for estimating expected credit losses Any measurement of expected credit losses under IFRS 9 shall reflect an unbiased and probability-weighted amount that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money. Also, the entity should consider reasonable and supportable information about past events, current conditions and reasonable and supportable forecasts of future economic conditions when measuring expected credit losses. To reflect time value, expected losses should be discounted to the reporting date using the effective interest rate of the asset (or an approximation thereof) that was determined at initial recognition. A credit-adjusted effective interest rate should be used for expected credit losses of purchased or originated credit-impaired financial assets. In contrast to the effective interest rate (calculated using expected cash flows that ignore expected credit losses) the credit-adjusted effective interest rate reflects expected credit losses of the financial asset. Presentation Whilst interest revenue is always required to be presented as a separate line item, it is calculated differently according to the status of the asset with regard to credit impairment. In the case of a financial asset that is not a purchased or originated credit-impaired financial asset and for which there is no objective evidence of impairment at the reporting date, interest revenue is calculated by applying the effective interest rate method to the gross carrying amount. In the case of a financial asset that is not a purchased or originated creditimpaired financial asset but subsequently has become credit-impaired, interest revenue is calculated by applying the effective interest rate to the amortised cost balance, which comprises the gross carrying amount adjusted for any loss allowance. In the case of purchased or originated credit-impaired financial assets, interest revenue is always recognised by applying the credit-adjusted effective interest rate to the amortised cost carrying amount. Disclosures The new expected loss impairment model is accompanied by extensive disclosure requirements that are added to IFRS 7 Financial Instruments: Disclosures. They are designed to enable users of financial statements to understand the effect of credit risk on the amount, timing and uncertainty of future cash flows. 7

9 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Limited amendments to classification and measurement of financial assets Fair value through other comprehensive income (FVTOCI) category The final version of IFRS 9 introduces a new classification and measurement category of FVTOCI for debt instruments that meet the following two conditions: Business model test: The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. When an asset meets both of these conditions it is required to be measured at FVTOCI unless, on initial recognition, it is designated at fair value through profit or loss to address an accounting mismatch. For such assets, interest revenue, foreign exchange gains and losses and impairment gains and losses are recognised in profit or loss with other gains or losses (ie, the difference between those items and the total change in fair value) recognised in other comprehensive income (OCI). Any cumulative gain or loss recorded in OCI would be reclassified to profit and loss on derecognition or dealt with in accordance with specific guidance in the case of reclassifications. Interest income and impairment gains and losses are recognised and measured in the same manner as for assets measured at amortised cost such that the amounts in OCI represents the difference between the amortised cost value and fair value. This results in the same information in profit or loss as if the asset was measured at amortised cost, yet the statement of financial position reflects the instrument s fair value. Note: The FVTOCI category for debt instruments is not the same as the available-for-sale category under IAS 39. Under IAS 39 impairment gains and losses are based on fair value, whereas under IFRS 9 they are not. Instead, impairment is based on expected losses and is measured consistently with amortised cost assets (see above). Also, the criteria for measuring at FVTOCI are based on the entity s business model, which is not the case for the availablefor-sale category. Additional guidance The final Standard also adds guidance on how to determine whether financial assets are held under a business model that is hold to collect or hold to collect and sell with examples and explanations of the types and levels of sales that are acceptable for such business models. In addition to guidance on the business model test, the Standard adds guidance on the contractual cash flow characteristics test to clarify that in basic lending arrangements the most significant elements of interest are consideration for the time value of money and credit risk. If the time value of money element is modified (eg interest rate resets every month to a one-year rate), an entity is required to assess the modified element against new criteria introduced by the amendment. The application guidance also introduces an additional exception that allows certain additional prepayment features to meet the contractual cash flow characteristics requirements to qualify for amortised cost or FVTOCI measurement. Note: Entities will need to assess their business models for holding financial assets. For some entities, such as non-financial corporates, the assessment may be relatively simple as their financial assets may be limited to trade receivables and bank deposits where amortised cost measurement is likely. Entities that have a broader range of activities involving financial assets, eg lenders, investors in debt securities held for treasury activities, insurance entities, traders, will require a greater amount of effort to understand the business model and consider the motivations that would lead to disposals of financial assets. 8

10 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Effective date The Standard has a mandatory effective date for annual periods beginning on or after 1 January 2018, with earlier application permitted (subject to local endorsement requirements). The Standard is applied retrospectively with some exceptions (for example most of the hedge accounting requirements apply prospectively) but entities need not restate prior periods in relation to classification and measurement (including impairment). The final version of IFRS 9 supersedes all previous versions of the Standard. However, for annual periods beginning before 1 January 2018, an entity may elect to apply those earlier versions of IFRS 9 if the entity s relevant date of initial application is before 1 February Further information More information about these new requirements is available at 9 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

11 Accounting news IASB amended IAS 16 and IAS 41 Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals On 30 June 2014, the International Accounting Standards Board (IASB) published Agriculture: Bearer Plants (Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture). Prior to these amendments, IAS 41 required all biological assets to be measured at fair value less costs to sell, based on the principle that fair value measurement best reflects the biological transformation of such assets. Key changes introduced by the amendments The amendments define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16. Accordingly, an entity could elect to measure bearer plants at cost subsequent to initial recognition or at revaluation. A bearer plant is defined as a living plant that: a. is used in the production or supply of agricultural produce; b. is expected to bear produce for more than one period; and c. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. However, the produce growing on bearer plants is a biological asset that should be measured at fair value less costs to sell in accordance with IAS 41. Examples of plants which usually meet the definition of a bearer plant and are within the scope of IAS 16 include tea bushes, grape vines, oil palms and rubber trees. However, the produce growing on bearer plants, for example, tea leaves, grapes, oil palm fruit and latex, is within the scope of IAS 41. The amendments also result in government grants related to bearer plants no longer falling within the scope of IAS 41. Such grants should now be accounted for in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. Effective date The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application permitted. The amendments are to be applied retrospectively. On the initial application of the amendments, entities are permitted to use the fair value of items of bearer plants as their deemed cost as at the beginning of the earliest period presented. 10

12 Accounting news IASB amended IAS 27 Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals On 12 August 2014, the International Accounting Standards Board (IASB) has published Equity Method in Separate Financial Statements (Amendments to IAS 27). The amendments allow an entity to apply the equity method in accounting for its investments in subsidiaries, joint ventures and associates in its separate financial statements. Background IAS 27 Separate Financial Statements requires an entity to account for its investments in subsidiaries, joint ventures and associates either at cost or in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9). Separate financial statements are not required by IFRSs. In general, separate financial statements are required by local regulation or other financial statement users. In some jurisdictions (including Czech accounting legislation) corporate law does also require the use of the equity method in separate financial statements to measure investments in subsidiaries, joint ventures and associates. In addition, it was noted that in most cases the only difference between an entity s separate financial statements in accordance with IFRS and those prepared under local regulation was the use of the equity method. The IASB acknowledged these concerns and amended IAS 27 to add the option of using the equity method in an entity s separate financial statements for investments in subsidiaries, joint ventures and associates. Amendments The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements: at cost, in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures. The accounting option must be applied by category of investments. The amendments also clarify that when a parent ceases to be an investment entity, or becomes an investment entity, it shall account for the change from the date when the change in status occurred. In addition to the amendments to IAS 27, there are consequential amendments to IAS 28 to avoid a potential conflict with IFRS 10 Consolidated Financial Statements and to IFRS 1 First-time Adoption of International Financial Reporting Standards. Effective date The amendments are effective for annual periods beginning on or after 1 January 2016 with earlier application permitted. The amendments are to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. 11

13 Accounting news IFRS EU Endorsement Process Cash-pooling and its Reporting Invitation to a Seminar News in The European Financial Reporting Advisory Group (EFRAG) updated its report showing the status of endorsement of each IFRS, including standards, interpretations, and amendments, most recently on 18 July As of 23 July 2014, the following IASB pronouncements are awaiting European Commission endorsement for use in the EU: Amendments Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operation (issued in May 2014) Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (issued in May 2014) Amendments to IAS 16 and IAS 41 Bearer plants (issued in June 2014) IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Standards IFRS 9 Financial Instruments (issued in July 2014) IFRS 14 Regulatory Deferral Accounts (issued in January 2014) IFRS 15 Revenue from Contracts with Customers (issued in May 2014) Amendments to IAS 19 Defined Benefit Plans: Employee Contributions (issued in December 2013) Amendments to IAS 27 Equity Method in Separate Financial Statements (issued in August 2014) Annual Improvements to IFRSs Cycle (issued in December 2013) Annual Improvements to IFRSs Cycle (issued in December 2013) Click here for the Endorsement Status Report 12 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

14 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Invitation to a Seminar IFRS News 2014 Prague, Brno, Ostrava Dear All, We would like to invite you to Deloitte s traditional autumn seminar on International Financial Reporting Standards (IFRS). You will have the opportunity to learn which new standards, amendments and interpretations will have to be taken into account in preparing financial statements for 2014 and which in the following periods. We will introduce new rules which are either already effective or will become effective in the near future and will show their practical application on a number of examples. The seminar is predominantly intended for accountants, economists and financial managers of projects relating to IFRS and for all who want to know more about IFRS. Seminars will be held in Prague, Brno and Ostrava in Czech and will be delivered by our professionals. Timing Prague: 21 October 2014 and 25 November 2014 Brno: 12 November 2014 Ostrava: 13 November 2014 More information on: 13 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals

15 Accounting news Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Cash-pooling and its Reporting Invitation to a Seminar News in In the current issue we would like to bring you a summary of the current FASB standard-setting projects and a summary of significant adoption dates and deadline dates for FASB/EITF standards and proposals. This may help your company in ensuring that respective and relevant changes are adopted timely. For further details on specific standards or FASB initiatives, you may visit our web page to search for further details in Deloitte s publications and newsletters. IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Current Status of FASB Projects This table summarizes the objectives, current status, and next steps for the FASB s active standard-setting projects. Project Description Status and Next Steps Recognition and Measurements Projects Accounting for financial instruments The AFI project consists of three phases: (1) classification and measurement, (2) impairment, and (3) hedging. The overall purpose of the AFI project is to significantly improve the decision usefulness of financial instrument reporting for users of financial statements. The FASB believes that simplification of the accounting requirements for financial instruments should be an outcome of this improvement. Classification and Measurement In late 2013 and early 2014, the FASB decided to abandon work on the converged approach it had exposed for comment in February The Board is currently deliberating targeted improvements to existing GAAP and is expected to issue a final standard in the second half of In May 2014, the FASB discussed a number of items, including the accounting for equity investments, loan commitments, revolving lines of credit, and commercial letters of credit. Impairment In 2012, the FASB decided to abandon work on a converged approach. The Board is currently deliberating aspects of the current expected credit loss model that it exposed for comment in 2012 and is expected to issue a final standard in the second half of Hedging The FASB is expected to begin its deliberations once the classification and measurement and impairment phases of the AFI project are substantially complete. 14

16 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Accounting for goodwill for public business entities and not-forprofit entities Clarifying the definition of a business Consolidation: principal-versus-agent analysis Customer s accounting for fees in a cloud computing arrangement The purpose of this project is to reduce the cost and complexity of the subsequent accounting for goodwill for public business entities and not-for profit entities. The purpose of this project is to clarify the definition of a business with the objective of addressing whether transactions involving in-substance nonfinancial assets (held directly or in a subsidiary) should be accounted for as acquisitions (or disposals) of nonfinancial assets or as acquisitions (or disposals) of businesses. The project will include clarifying the guidance for partial sales or transfers and the corresponding acquisition of partial interests in a nonfinancial asset or assets. The purpose of this project is to provide criteria for a reporting entity to evaluate whether a decision maker is using its power as a principal or agent, eliminate inconsistencies in evaluating kick-out and participating rights, and amend the requirements for evaluating whether a general partner controls a limited partnership. The purpose of this project is to improve the guidance... about how a customer should account for its fees paid in a cloud computing arrangement. The FASB is currently waiting for the IASB to complete its postimplementation review of IFRS 3 before continuing redeliberations. No estimated completion date is available for the project. The FASB has not yet begun deliberating this project. On July 16, 2014, the FASB discussed the remaining issues related to its consolidation project. The Board decided not to issue a revised ED but directed the staff to prepare a draft of an ASU to distribute to selected constituents (including financial statement users, preparers, and auditors) to obtain feedback on the proposed amendments. On the basis of feedback received, the FASB will determine how to proceed at a future meeting. In June 2014, the FASB tentatively decided that the guidance in ASC through would be within the scope of ASC and that entities would apply that guidance to cloud computing arrangements in determining whether a contract includes a software license or instead is a service contract. The FASB is expected to issue an ED in the second half of

17 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Financial statements of not-for-profit entities Insurance: targeted improvements to the accounting for longduration contracts Leases Simplifying the subsequent measurement of inventory Technical corrections and improvements The purpose of this project is to reexamine existing standards for financial statement presentation by not-forprofit entities, focusing on improving: 1. Net asset classification requirements 2. Information provided in financial statements and notes about liquidity, financial performance, and cash flows. The purpose of this project is to develop targeted improvements to insurance accounting. Those improvements may address recognition, measurement, presentation, and disclosure requirements for longduration insurance contracts. The purpose of this project is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. The purpose of this project is to explore the possible simplification of the subsequent measurement of inventory under U.S. GAAP. The purpose of this project is to provide regular updates and improvements to the Codification based on feedback received from constituents. The FASB is currently deliberating various aspects of this project and is expected to issue an ED in the second half of In March 2014, the FASB decided to limit the scope of the project and focus on targeted improvements to existing GAAP. In April and July 2014, the FASB further discussed the direction of its project on long-duration insurance contracts. No estimated completion date is available for the project. At their July 2014 meeting, the FASB and IASB continued deliberating the leases project, discussing sale-and-leaseback transactions and lessor disclosures. No estimated completion date is available for the project. On July 15, 2014, the FASB issued an Exposure Draft. This is a standing project. The FASB is expected to issue an Exposure Draft in the second half of

18 Accounting news Presentation and Disclosure Projects Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 Clarifying certain existing principles on the statement of cash flows Government assistance disclosures Going concern The purpose of this project is to to reduce diversity in practice in financial reporting by clarifying certain existing principles in Topic 230, Statement of Cash Flows in the FASB Codification, including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. The purpose of this project is to develop disclosure requirements about government assistance that improves the content, quality and comparability of financial information and financial statements and that is responsive to the emerging issues in the changing financial and economic environment in which reporting entities operate. The purpose of this project is to provide preparers with guidance in U.S. GAAP on management s responsibilities for evaluating and disclosing going concern uncertainties and, thereby, reduce existing diversity in footnote disclosures. In doing so, the Board believes that the proposal also would improve the timeliness and the quality of footnote disclosures about going concern uncertainties. The purpose of this project is to develop targeted improvements to insurance accounting.... For short-duration contracts, improvements would center on enhanced disclosures. The FASB has not yet begun deliberating this project. The FASB has not yet begun deliberating this project. In May 2014, the FASB continued redeliberating going concern and decided to issue a final ASU. 17 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Insurance: disclosures about short- duration contracts In July 2014, the FASB continued discussing the direction of its project on the disclosure requirements for short-duration insurance contracts. No estimated completion date is available for the project.

19 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Disclosure framework Investment companies: disclosures about investments in another investment company Simplifying income statement presentation by eliminating extraordinary items The disclosure framework project consists of two phases: (1) the FASB s decision process and (2) the entity s decision process. The overall objective of the project is to improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of each entity s financial statements. (Although reducing the volume of the notes to financial statements is not the primary focus, the Board hopes that a sharper focus on important information will result in reduced volume in most cases.) The purpose of this project is to require disclosures in an investment company s financial statements that will provide transparency into the risks, returns, and expenses of an investee that is also an investment company. The purpose of this project is to explore the possible removal of the extraordinary item guidance in ASC from U.S. GAAP. FASB Decision Process On March 4, 2014, the FASB issued an Exposure Draft (further ED ) of a proposed Concepts Statement that would add a new chapter to the Board s conceptual framework for financial reporting. Comments on the ED were due by July 14, Entity Decision Process The FASB staff is currently analyzing ways to further promote the appropriate use of discretion by entities. This process will take into account section-specific modifications to ASC 820, ASC 330, ASC 715, and ASC 740. In April 2014, the FASB decided to significantly scale back its tentative disclosure requirements. The FASB is expected to issue an ED in the second half of On July 15, 2014, the FASB issued an ED. 18

20 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals Significant Adoption Dates and Deadlines The chart below illustrates significant adoption dates and deadline dates for FASB/EITF standards and proposals. Content recently added or revised is highlighted in blue. FASB/EITF Affects Status Significant Adoption Dates ASU , Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period a consensus of the FASB Emerging Issues Task Force (issued June 19, 2014) ASU , Transfers and Servicing: Repurchase- to-maturity Transactions, Repurchase Financings, and Disclosures (issued June 12, 2014) Reporting entities that grant their employees share-based payments in which the terms of the award stipulate that a performance target that affects vesting could be achieved after the requisite service period Entities that enter into repurchase- -to- maturity transactions or repurchase financings. Effective for annual periods, and interim periods within those annual periods, beginning after December 15, Early adoption is permitted. The effective date for public business entities is the same as that for all other entities For public business entities, the accounting changes in the ASU are effective for the first interim or annual period beginning after December 15, For all other entities, the accounting changes are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, Early application for a public business entity is prohibited; however, all other entities may elect to apply the requirements for interim periods beginning after December 15,

21 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals ASU , Development Stage Entities (ASC 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (issued June 10, 2014) ASU , Revenue From Contracts With Customers (issued May 28, 2014) Development-stage entities under U.S. GAAP, and reporting entities that may hold an interest in an entity that is a development- -stage entity. All entities. For public entities, the ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. For other entities, the ASU is effective for annual reporting periods beginning after December 15, 2014, and interim reporting periods beginning after December 15, For public business entities, the amendment eliminating the exception to the sufficiency- of-equity- -at-risk criterion for development- stage entities in ASC should be applied retrospectively for annual reporting periods beginning after December 15, 2015, and interim periods therein. For all other entities, the amendments to ASC 810 should be applied retrospectively for annual reporting periods beginning after December 15, 2016, and interim reporting periods beginning after December 15, Early application is permitted for any annual reporting period or interim period for which the entity s financial statements have not yet been made available for issuance. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, Early application is not permitted. For nonpublic entities, the ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within annual reporting periods beginning after December 15, Nonpublic entities may also elect to apply the ASU as of (1) the same effective date as that for public entities (annual reporting periods beginning after December 15, 2016, including interim periods); (2) annual periods beginning after December 15, 2016 (excluding interim reporting periods); or (3) annual periods beginning after December 15, 2017 (including interim reporting periods). 20

22 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals ASU , Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (issued April 10, 2014) ASU , Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements a consensus of the Private Company Council (issued March 20, 2014) ASU , Technical Corrections and Improvements Related to Glossary Terms (issued March 14, 2014) Entities that have either of the following: 1. A component of an entity that either is disposed of or meets the criteria in ASC E to be classified as held for sale. 2. A business or nonprofit activity that, on acquisition, meets the criteria in ASC E to be classified as held for sale. All entities other than public business entities, not-for-profit entities, or employee benefit plans within the scope of ASC 960 through ASC 965 on plan accounting. All entities. Public business entities will apply the new ASU prospectively to all disposals (or classifications as held for sale) that occur in annual periods (and interim periods therein) beginning on or after December 15, For all other entities, the new ASU will be effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods thereafter. Early adoption is permitted for any annual or interim period for which an entity s financial statements have not yet been previously issued or made available for issuance. Effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, Early application is permitted, including application to any period for which an entity s annual or interim financial statements have not yet been made available for issuance. Effective upon issuance for both public and nonpublic entities. 21

23 Accounting news Cash-pooling and its Reporting Invitation to a Seminar News in IFRS IASB published final version of IFRS 9 IASB amended IAS 16 and IAS 41 IASB amended IAS 27 IFRS EU Endorsement Process Invitation to a Seminar IFRS News 2014 US GAAP Current Status of FASB Projects and Significant Adoption Dates and Deadlines of FASB/EITF standards and proposals ASU , Service Concession Arrangements a consensus of the FASB Emerging Issues Task Force (issued January 23, 2014) ASU , Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure a consensus of the FASB Emerging Issues Task Force (issued January 17,2014) ASU , Accounting for Certain Receive- Variable, Pay-Fixed Interest Rate Swaps Simplified Hedge Accounting Approach a consensus of the Private Company Council (issued January 16, 2014) Operating entities in a service concession arrangement entered into with a public-sector entity grantor when the grantor (1) controls or has the ability to modify or approve the services that the operating entity must provide with the infrastructure, to whom it must provide them, and at what price, and (2) controls, through ownership, beneficial entitlement, or otherwise, any residual interest in the infrastructure at the end of the term of the arrangement. Creditors who obtain physical possession (resulting from an in-substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable. All entities except public business entities and not-for-profit entities as defined in the Master Glossary of the FASB Accounting Standards Codification, employee benefit plans within the scope of ASC 960 through ASC 965 on plan accounting, and financial institutions. For public business entities, the ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, For entities other than public business entities, the ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, Early adoption is permitted. The ASU should be applied on a modified retrospective basis to service concession arrangements that exist at the beginning of an entity s fiscal year of adoption. For public business entities, the ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, For entities other than public business entities, the ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, Effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. Private companies have the option of applying the amendments in this ASU by using either a modified retrospective approach or a full retrospective approach. 22