Upcoming Significant GAAP Accounting Pronouncements as of

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1 Below is a list of finalized upcoming significant GAAP guidance that are not yet in effect as of August 31, If you have any questions about these upcoming guidances, please contact the experienced CPAs at Larson & Company. ASU Area Description Date of Effectiveness ASU , , , , , , Revenue During 2014 and 2015, the FASB issued Accounting Standards Update and , Revenue from Contract with Customers, respectively, which revises previous revenue recognition standards to improve guidance on revenue recognition requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Public - fiscal years beginning after December 15, 2017 Private - fiscal 15, Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also provides additional disclosure requirements and clarification for revenue recognition for principal vs. agent parties. Subsequent ASUs provided additional clarity to the specifics of terminology used in the core principal. ASU Financial Instruments In January of 2016, the FASB issued Accounting Standards Updates , Financial Instruments Overall, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose, however, to measure equity investments that do not have readily determinable fair values at cost minus impairment. It also eliminates disclosure of fair value for investments recorded at amortized cost. The amendment also introduced regarding the process for determining impairments of securities and simplified certain disclosures. Any adjustment at adoption will be made by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. 15, 2017.

2 ASU Leases In March of 2016, the FASB issued Accounting Standards Update , Leases, which requires all leases that have a term of more than 12 months to be recognized as assets and liabilities on the balance sheet at inception. A lessee would recognize a lease liability to make lease payments owed to a lessor (liability) and a benefit for the right to use the leased asset (asset) for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee would depend on whether the lessee is expected to consume more than an insignificant portion of the economic benefits embedded in the underlying asset. ASU Extinguishment of Liabilities In March 2016, the FASB issued Accounting Standards Update , Liabilities - Extinguishment of Liabilities, which clarifies that liabilities related to the sale of prepaid stored-value products, such as gift cards, are financial liabilities. 15, ASU Financial Instruments - Credit Loses In June of 2016, the FASB issued Accounting Standards Update , Financial Instruments Credit Loses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This requirement eliminates the probable initial recognition threshold in Current GAAP which has delayed recognition of credit losses until the loss was probable. Instead, the new treatment will better reflect an entity s current estimate of all expected credit losses. In addition, the new guidance requires that any credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down. Initial allowance for credit losses is added to the purchase price rather than reported as a credit loss expense. Subsequent changes in the allowance for credit losses are recorded in credit loss expense. This will allow entities to also allow entities to record reversals of credit losses in current period net income, whereas the current GAAP prohibits reflecting these improvements in current period earnings. 15, 2020.

3 ASU Not-For-Profit Entities In August of 2016, the FASB issued Accounting Standards Update , Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities (the Standard ). The Standard establishes the new financial reporting framework for not-for-profit organizations. The update will result in changes to the presentation of the statements of financial position, activities, and cash flows. The new guidance reduces the classification of net assets to two categories: (1) net assets without donor restrictions and (2) net assets with donor restriction. It also changes the classification and accounting for underwater endowments. The Standard requires enhanced net asset disclosures which include information about the timing, nature of restrictions, and composition of the net assets with donor restrictions. Enhanced disclosures are also required for board designated net assets, which are classified as net assets without donor restrictions. All-for fiscal years beginning after December 15, To improve the transparency and utility of liquidity information provided in not-for-profit financial statements, the Standard requires disclosure of quantitative and qualitative liquidity information, including how an entity manages liquidity risk and disclosures about availability of assets to meet cash needs within one year of the balance sheet date. Changes to the statement of activities includes a requirement to report the total change in net assets and the changes in each of the two new classes of nets assets described above. All nonprofits will be required to present an analysis of expenses by function and by natural classification. This can be done on the face of the statement of activities, in a separate statement, or in the footnotes to the financial statements. The statement of cash flows may continue to be presented using the direct or indirect method. If the direct method is adopted, the organization is no longer required to include the indirect method reconciliation.

4 ASU Statement of Cash Flows In August 2016, the FASB issued Accounting Standards Update , Statement of Cash Flows (Topic 230), which provides clarification on how certain transactions should be classified and presented in the statement of cash flows. These transactions includes debt prepayment or debt extinguishment costs, settlement of zero-coupon or insignificant interest rate debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization Transactions, separately identifiable cash flows and application of the predominance principle. 15, ASU Income Taxes In October 2016, the FASB issued Accounting Standards Update , Income Taxes (Topic 740). This update allows entity to recognize income tax consequences of an intra-entity transfer of an asset other than inventory at the time when transfer occurs. Two common examples of assets included in the scope are intellectual property and property, plant, and equipment. However, inventory remains excluded from this scope. 15, ASU Statement of Cash Flows In November 2016, the FASB issued Accounting Standards Update , Statement of Cash Flows (Topic 230). This update require that a statement of cash flows explain the change during the period to also include restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-ofperiod total amounts shown on the statement of cash flows. 15, 2017.

5 ASU Business Combinations In January 2017, the FASB issued Accounting Standards Update , Business Combination, to clarify and provide guidance to differentiate between asset purchase and a business combination. The amendment provides a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the amendment in this Update (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. 15, ASU Goodwill and Other In January 2017, the FASB issued Accounting Standards Update , Intangibles Goodwill and Other (Topic 350). This eliminated Step 2 of goodwill impairment testing, which had required an entity to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unity had been acquired in a business combination. Instead, an entity will merely compare the entity s fair value with its carrying value. 15, , ASU Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets In February 2017, the FASB issued Accounting Standards update , Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets. The update provides additional guidance to the real estate industry surrounding revenue recognition by introducing the following: - Further define what "in substance nonfinancial asset" represents - Unifies guidance related to partial sales of nonfinancial assets - Eliminates rules specifically addressing sales of real estate - Removes exceptions to the financial asset derecognition model - Clarifies the accounting for contributions of nonfinancial assets to joint ventures

6 ASU Plan Accounting In February 2017, the FASB issued Accounting Standards update , Plan Accounting, to eliminate diversity of industry practice by prescribing the following: 1) A plan's interest in a master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. 2) Removes the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments. 3) All plans must disclose (1) their master trust's other asset and liability balances and (2) the dollar amount of the plan's interest in each of those balances. 4) Do not require investment disclosures relating to the 401 (h) account assets be provided in the health and welfare benefit plan's financial statements. All - fiscal years beginning after December 15, ASU Compensation - Retirement Benefits ASU Receivables - Nonrefundable Fees and Other Costs In March 2017, the FASB issued Accounting Standards update , Compensation - Retirement Benefits, which require an employer report the service cost component in the same line items of items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. In March 2017, the FASB issued Accounting Standards update , Receivables - Nonrefundable Fees and Other Costs, which shortened the amortization period for certain callable debt securities held at a premium by requiring it to be amortized to the earliest call date. 15, 2017.

7 ASU Compensation - Stock Compensation In May 2017, the FASB issued Accounting Standards update , Compensation - Stock Compensation, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The update requires an entity to account for effects of modification unless all of the following are met: 1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. 2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. All - for fiscal periods beginning 15, 2017 ASU Earnings per Share In July 2017, FASB issued Accounting Standards update , provided additional guidance over the proper accounting treatment of complex financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. This amendment provides guidance over the classification and the recognition of the effects on earnings per share (EPS) of financial instruments with down round features.

8 of ASU Derivatives and Hedging In August 2017, FASB issued Accounting Standards update , Derivatives and Hedging, to help improve the accounting for derivatives designated as hedges. The guidance improves this by: 1. Providing more hedging strategies eligibility for hedge accounting 2. Allowing public entities, public not-for-profit, and financial institutions till the end of the first quarter in which hedge is designated to perform an initial assessment. All other entities will have until their financial statements are available to be issued. 3. Permits qualitative effectiveness assessments for certain hedges instead of quantitative test after the initial qualification test. 4. For cash flow hedges, if hedge is highly effective, all changes in the fair value will be recorded in OCI and reclassified to earnings when hedged item impacts earnings. 5. Changes in fair value of the derivative will be recorded against the same income statement line item as the earnings effect of the hedged item. 6. Allows for cross-currency basis spreads to be excluded from the assessment of hedge effectiveness. 7. Additional disclosure include cumulative basis adjustments for fair value hedges and the effect of hedging on individual income statement line items. ASU Codification Improvements to Topic 995, U.S. Steamship Entities In November 2017, FASB issued Accounting Standards Update , which eliminates an old Topic 995, U.S. Steamship Entities, as it is no longer relevant. The update states that if an entity has unrecognized income taxes related to statutory deposits made on or before December 15, 1992, the entity would be required to recognize the unrecognized income taxes in accordance with Topic 740. All - fiscal years beginning after December 15, ASU Leases (Topic 842) In January 2018, FASB issued Accounting Standards Update , which allows an optional transition practical expedient to not evaluate for the implementation of ASU (which introduced Topic 840), any existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840. Once an entity adopts Topic 840, it should apply that Topic prospectively to all new (or modified) land easements to determine whether the arrangement should be accounted for as a lease.

9 ASU Income Statement - Reporting Comprehensive Income (Topic 220) ASC 740, Income Taxes, requires the remeasurement of deferred tax assets and liabilities as a result of a change in tax laws or rates to be presented in net income from continuing operations. However, adjustment to temporary differences recorded in AOCI through continuing operations may result in a disproportionate share of tax effects being "stranded" in AOCI. Such items are referred to by FASB as "stranded tax effects". In February 2018, FASB issued Accounting Standards Update , which allows for but does not require a reclassification from Accumulated Other Comprehensive Income (AOCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act which was enacted in December of All - for fiscal years beginning after December 15, ASU Compensation - Stock Compensation (Topic 718) In June 2018, FASB issued Accounting Standards Update , Compensation - Stock Compensation, which expanded the scope of Topic 718 to include share-based payments transactions for acquiring goods and services from nonemployees. This amendment may significant change the overall measurement objective, measurement date, classification reassessment of certain Equity-Classified Awards, as well as some guidance on how such shared-based payments should be valued specifically for nonpublic entities. The amendment also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

10 ASU Not-for-Profit Entities (Topic 958) In June 2018, FASB issued Accounting Standards Update , Not-for-Profit Entities, to provide better clarity on whether a transfer of assets (or the reduction, settlement, or cancellation of liabilities) is a contribution or an exchange transaction. Entities should determine whether a resource provider (including foundation, a government agency, or other) receives a commensurate value. If such transfer of values exist, an exchange transaction is likely. Additionally, entities should also further determine whether the resource provider payment represents a payment from a third-party payer on behalf of an existing transaction between the recipient and an identified customer. If so, other guidance (for example, Topic 606) applies. Additionally, if the terms of an agreement for payment by the donor includes a barrier that must be overcome and either a right of return of assets transferred or a right of release of a promisor's obligation to transfer assets, such transactions should be considered an exchange transaction. For public business entity or an NFP that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market and serves as a resource recipient, the entity should apply the amendments in this ASU on contributions received to annual periods beginning after June 15, All other entities - for fiscal years beginning after December 15, 2019.

11 ASU Leases (Topic 842) In July 2018, FASB issued Accounting Standards Update , Leases (Topic 842), which provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period's financials will remain the same as those previously presented. Entities that elects this optional transition method must provide the disclosures that were previously required. Additionally, this guidance provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following requirements are met: 1. The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same. 2. The lease component, if accounted for separately, would be classified as an operating lease. Additional disclosures are required if entity is electing this practical expedient.

12 ASU Financial Services - Insurance (Topic 944) In August 2018, FASB issued Accounting Standards Update , Financial Services - Insurance (Topic 944), which provides new updates to accouting treatment of the benefit liability estimate, amortization of deferred acquisition costs, and disclosure requirements of long-duration insurance contracts for insurance carriers. These updates includes the following: 15, , Assumptions used to measure liability for future policy benefits for traditional limited-payment contracts were previously locked at contract inception. New guidance would require insurance entities to (1) review and, if there is a change, update the assumptions used to measure cash flows at least annually and (2) update the discount rate assumption at each reporting date. The provision for risk of adverse deviation and premium deficiency (or loss recognition) testing are eliminated. Changes of the liability due to updated cash flow assumptions vs. updating discount rate assumption is required to be either in net income or other comprehensive income, respectively. The amendments also requires than an insurance entity discount expected future cash flows at an upper-medium grade (low-credit-risk) fixedincome instrument yield that maximized the use of observable market inputs instead of using an unobservable discount rate (a rate based on an insurance entity's expected yield on its invested assets) is used to discount future cash inflows. 2. Measurement of market risk benefits associated with deposits contracts is now required to be measured at fair value instead of a potential alternative option of using an insurance accrual model. The portion of any change in fair value attributable to a change in the instrument-specific credit risk is required to be recognized in other comprehensive income. 3. Amortization methods of deferred acquisition costs is now simplified to be amortized on a constant level basis over the expected term of the related contracts. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to an impairment test. 4. Disclosures now require than an insurance entity provide disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. The amendment also requires that an insurance entity disclose information about

13 significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgements, and assumptions, and the effect of those changes on measurement. ASU Fair Value Measurement (Topic 820) In August 2018, FASB issued Accounting Standards Update , Fair Value Measurement (Topic 820), and modifies certain disclosure requirements for Fair Value Measurements. These changes includes: - Removal of: (1) The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy (2) The policy for timing of transfers between levels (3) The valuation process for Level 3 fair value measurements, and (4) For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period. All entities - for fiscal years beginning after December 15, Modified disclosure to include: (1) In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities (2) For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. (3) The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. - Added the following disclosures: (1) The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period. (2) The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

14 ASU Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic ) In August 2018, FASB issued Accounting Standards Update , Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic ), and modifies certain disclosure requirements for entities with defined benefit plans. These changes includes: - Removal of: (1) The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. (2) The amount and timing of plan assets expected to be returned to the employer. (3) The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law. (4) Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan. (5) For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets. (6) For public entities, the effects of a one-percentagepoint change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. - Modified the guidance to clarify that the following information for defined benefit plans should be disclosed: (1) The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets. (2) The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. - Added the following disclosures: (1) The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates. (2) An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. 15, , 2021.

15 ASU Intangibles - Goodwill and Other-Internal- Use Software (Subtopic ) In August 2018, FASB issued Accounting Standards Update , Intangibles - Goodwill and Other- Internal-Use Software (Subtopic ), which provides more specific guidance for capitalizing implementations costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internaluse software license). The guidance further allows an entity (customer) in a hosting arrangement that is a service contract to capitalized cost for implementation activities the application development stage depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. 15, Andrew Wan, CPA, awan@larsco.com South 1300 East Sandy, UT 84094