Accounting and Financial Reporting Developments for Public Companies

Transcription

1 Accounting and Financial Reporting Developments for Public Companies SECOND QUARTER UPDATE 2018 The Quarterly Newsletter is a quarterly publication from EKS&H s Technical Accounting and Auditing Group. In this newsletter, we highlight some of the more important 2018 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 other significant impacts of adoption on the company SEC staff has indicated they will monitor disclosures about the expected effects of the new lease, financial instruments and credit losses standards and investors should expect the level of transition disclosures to increase as a company progresses in its implementation plans. 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. ICFR The new revenue, lease, credit losses and financial instrument standards will require greater judgment when applying the guidance. Registrants should reassess the adequacy of current internal controls and identify and implement any appropriate changes. 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. Management and audit committees should consider the disclosure requirements related to the establishment of new controls and processes related to the adoption as well as postadoption of the new accounting standards. Smaller Reporting Company Definition Expanded In June 2018, the SEC approved amendments to raise the thresholds in the smaller reporting company (SRC) definition that expands the number of smaller companies eligible to provide scaled disclosures under Regulation S-K and Regulation S-X. The final rule is effective 60 days after publication in the Federal Register. SECOND QUARTER UPDATE (PUBLIC COMPANY)

2 Under the previous definition, SRCs generally were companies with less than $75 million in public float. Companies with no public float because they have no public equity outstanding or no market price for their public equity were considered SRCs if they had less than $50 million in annual revenues. Under the amendments, companies with a public float of less than $250 million will qualify as SRCs. A company with no public float or with a public float of less than $700 million will qualify as a SRC if it had annual revenue of less than $100 million during its most recently completed fiscal year. A calendar yearend company meeting the above amended threshold will be able to apply the scaled disclosures in its September 30, 2018 Form 10-Q (assuming publication in the Federal Register by August 1, 2018). However, we advise management to carefully consider stakeholder expectations of financial reporting in deciding whether to elect to reduce disclosures. The final amendments did not affect the current thresholds contained in the accelerated filer and large accelerated filer definitions in Exchange Act Rule 12b- 2. As a result, companies with $75 million or more of public float that qualify as SRCs will remain subject to the requirements that apply to accelerated filers, including the timing of the filing of periodic reports and the requirement that accelerated filers provide the auditor s attestation of management s assessment of internal control over financial reporting required by Section 404(b) of the Sarbanes-Oxley Act of The SEC is considering changes to the accelerated filer definition that, if adopted, would have the effect of reducing the number of companies that qualify as accelerated filers. If a company determines that it does not qualify as a SRC under the amended thresholds, it will remain unqualified as an SRC until it determines that it meets one or more lower qualification thresholds. The subsequent qualification thresholds are set at 80% of the initial qualification thresholds. (public float of less than $200 million, if it previously had $250 million or more of public float or revenues of less than $80 million of annual revenues, if it previously had $100 million or more of annual revenues; and less than $560 million of public float, if it previously had $700 million or more of public float.) A calendar yearend company that does not meet the amended initial qualification thresholds, but later meets the amended subsequent qualification thresholds, may apply the scaled disclosures in its next Form 10-Q. For example, a calendar yearend company meeting the public float threshold June 30, 2019, will be able to apply the scaled disclosures in its September 30, 2019 Form 10-Q. Rule 3-05(b)(2)(iv) of Regulation S-X was also amended to increase the net revenue threshold in that rule from $50 million to $100 million. As a result, companies may omit financial statements of businesses acquired or to be acquired for the earliest of the three fiscal years otherwise required by Rule 3-05 if the net revenues of that acquired business are less than $100 million. Also of note is that a company may qualify as both an emerging growth company (EGC) and a SRC. The difference is that there is a time limit for EGCs to elect scaled disclosures whereas there is no time limit for SRCs. Changes to Public Liquidity Risk Management Disclosure In June 2018, the SEC adopted amendments to public liquidity-related disclosure requirements for certain open-end funds. Under the amendments, funds would discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity risk management programs. This requirement replaces a pending requirement that funds publicly provide a quantitative end-of-period snapshot of historic aggregate liquidity classification data for their portfolios on Form N-PORT. These amendments will become effective sixty days after they are published in the Federal Register. These actions are meant to help provide investors with accessible and useful information about the liquidity risk management practices of the funds they hold. SEC Adopts Inline XBRL for Tagged Data In June 2018, the SEC adopted amendments to extensible Business Reporting Language (XBRL) requirements for operating companies and funds. The amendments, which will go into effect in phases, require the use of Inline XBRL for financial statement information and risk/return summaries and eliminate the requirements for operating companies and funds to post XBRL data on their websites upon their adoption of the amendments. Inline XBRL involves embedding XBRL data directly into the filing so that the disclosure document is both humanreadable and machine-readable. The amendments are SECOND QUARTER UPDATE (PUBLIC COMPANY)

3 intended to reduce, over time, XBRL preparation time and effort by eliminating duplication and facilitating the review of XBRL data as well as reduce the likelihood of inconsistencies between HTML and XBRL filings and improve the quality of XBRL data. Inline XBRL should also enhance the usability of structured disclosures for investors through greater accessibility and transparency of the data and enhanced capabilities for data users. For fund investors, the benefits of Inline XBRL are expected to be enhanced by the more timely availability of risk/return summary XBRL data due to the elimination of the 15 business day XBRL filing period and the amendments also will facilitate efficiencies in the filing process by permitting the concurrent submission of XBRL data files with certain post-effective amendment filings. Funds Funds that are currently required to submit risk/return summary information in XBRL will be required, on a phased basis, to transition to Inline XBRL as follows: Large fund groups (net assets of $1 billion or more as of the end of their most recent fiscal year) will be required to comply two years after the effective date of the amendments. All other funds will be required to comply three years after the effective date of the amendments. As noted above, the amendments also eliminate the 15 business day filing period for risk/return summary XBRL data, so that the data will be more timely available to the public. Companies should consider controls and procedures related to interactive data when submitting the Inline XBRL data file. The use of interactive data files is specifically excluded from the officer certification requirements but the exclusion does not allow a company to exclude related controls and procedures from management s evaluation of these controls and procedures. The requirements do not change the categories of filers or scope of disclosures subject to XBRL requirements. The requirements are phased in as follows: Non-GAAP Financial Measures In April 2018, the staff in the SEC s Division of Corporation Finance added two questions to its compliance and disclosure interpretations (C&DIs) related to non-gaap financial measures associated with business combinations and related forecasts. Specifically, the SEC added Questions and and renumbered the previous Questions and to and , respectively. s Cybersecurity Operating Companies Operating companies that are currently required to submit financial statement information in XBRL will be required on a phased basis, to transition to Inline XBRL as follows: Large accelerated filers that use U.S. GAAP will be required to comply beginning with fiscal periods ending on or after June 15, Accelerated filers that use U.S. GAAP will be required to comply beginning with fiscal periods ending on or after June 15, All other filers will be required to comply beginning with fiscal periods ending on or after June 15, Filers will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date. In February 2018, the SEC issued an interpretive release to provide guidance to public companies when preparing disclosures about cybersecurity risks and incidents. The release also communicates the Commission s views on the importance of maintaining comprehensive policies and procedures related to cybersecurity risks and incidents. The release can be found at interp/2018/ pdf. We discussed the release in our 2018 First Quarter Update Newsletter. In April 2018, the Center for Audit Quality (CAQ) issued a toolkit for board members, Cybersecurity Risk Management Oversight. The tool provides questions that board members charged with cybersecurity risk oversight can use as they discuss these risks and disclosures with management and auditors. The tool is also useful to management teams and private company governance committees as they address cybersecurity risks. SECOND QUARTER UPDATE (PUBLIC COMPANY)

4 The questions are grouped under four key areas: 1. Understanding how the financial statement auditor considers cybersecurity risk 2. Understanding the role of management and responsibilities of the financial statement auditor related to cybersecurity disclosures 3. Understanding management s approach to cybersecurity risk management 4. Understanding how CPA firms can assist boards of directors in their oversight of cybersecurity risk management s Accounting Guidance Issued in Second Quarter 2018 Simplifying Accounting for Nonemployee Share-Based Payments ASU , Compensation Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, simplifies accounting for share-based payments issued to nonemployees for goods and services that are currently accounted for under Topic , Equity-Based Payments to Nonemployees. The existing guidance on nonemployee share-based payments is significantly different from current guidance for employee share-based payments and can be very difficult to apply. The ASU expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments issued to nonemployees for goods or services to be used or consumed in the issuer s own operations, substantially aligning the accounting for both, and supersedes Topic 505. The amendments do not apply to share-based payments used to effectively provide financing to the issuer, or 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. A company should apply the requirements of Topic 718 to nonemployee awards except for guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). Below is a comparison of the current and amended guidance for these awards: Current GAAP Overall Measurement Objective: Nonemployee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Summary of Amendments Consistent with the accounting for equity-classified awards issued to employees, equity-classified nonemployee awards within the scope of Topic 718 will be measured at grant-date fair value. Measurement Date: The measurement date for equity-classified nonemployee share-based payment awards is the earlier of the date at which: A commitment for performance by the counterparty is reached, and The date at which the counterparty s performance is complete. Equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. Awards with Performance Conditions: Nonemployee share-based payment awards with performance conditions are measured at the lowest aggregate fair value. Consistent with the accounting for employee sharebased payment awards, a company considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. SECOND QUARTER UPDATE (PUBLIC COMPANY)

5 Current GAAP (continued) Classification Reassessment of Certain Equity-Classified Awards: Generally, the classification of equity-classified nonemployee share-based payment awards is subject to other GAAP (ex. Topic 815, Derivatives and Hedging) once the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. This often results in the need to reassess the classification of such awards. Summary of Amendments (continued) Generally, the classification of equity-classified nonemployee share-based payment awards will continue to be subject to the requirements of Topic 718 unless modified after: The good has been delivered and/or service has been rendered Any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and The nonemployee is no longer providing goods or services. This eliminates the current requirement to reassess classification of such awards upon vesting. The amendments are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, 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, but no earlier than a company s adoption date of Topic 606, Revenue from Contracts with Customers. Upon adoption, a company should only remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. These awards should be measured at fair value as of the adoption date. Note that assets that are completed are not remeasured. For example, finished goods inventory or equipment that has begun amortization should not be remeasured upon transition. as contributions or exchanges and reduces diversity in practice. The new ASU does not apply to transfers of assets from governments to businesses. The ASU clarifies and improves current guidance about whether a transfer of assets or the reduction, settlement, or cancellation of liabilities is a contribution or an exchange transaction. It provides criteria for determining whether the resource provider is receiving commensurate value in return for the resources transferred which, depending on the outcome, determines whether the organization follows contribution guidance or exchange transaction guidance in the revenue recognition and other applicable standards. It also provides a more robust framework for determining whether a contribution is conditional or unconditional, and for distinguishing a donor-imposed condition from a donor-imposed restriction. This is important because such classification affects the timing of contribution revenue and expense recognition. Not-For-Profit Grant and Contribution Accounting ASU , Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations and business enterprises. The ASU clarifies whether certain transactions should be characterized The amendments are effective for a public company or a not-for-profit organization 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 for transactions in which the entity serves as a resource recipient to annual reporting periods beginning after June 15, 2018, including interim periods within that annual period. Other organizations would apply the standard to SECOND QUARTER UPDATE (PUBLIC COMPANY)

6 annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after The amendments are effective for a public company or a not-for-profit organization 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 would apply the new standard for transactions in which the entity serves as a resource provider to annual reporting periods beginning after December 15, 2018, including interim periods within that annual period. Other organizations would apply the standard to annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, Early adoption of the amendments in this ASU is permitted. s New Revenue Standard Disclosure Considerations Calendar-year public companies adopted ASC 606 effective January 1, As a reminder, the SEC mandates that all required disclosures for both annual and interim periods be included in each of the 2018 quarterly filings. Many companies are finding that providing the disclosures is more challenging than originally anticipated. s New Lease Standard Effective Calendar Year 2019 The new lease standard is effective yearend 2019 for public companies. See EKS&H Newsletter First Quarter Update 2016 for discussion of the new guidance. s ASUs Expected to be Issued Third Quarter 2018 The FASB has many active standard-setting projects in process. You can find an inventory as well as the current status of each project on FASB.org. There are several projects that are expected to result in the issuance of final ASUs in the third quarter. We will discuss these in depth in our Third Quarter Update Newsletter. The topics include the following: Targeted improvements to related-party guidance for variable interest entities (VIEs) Accounting by a customer for implementation costs incurred in a cloud computing arrangement that is considered a service contract Targeted amendments to ASC 842, Leases. See later discussion under New Lease Standard Effective Calendar Year 2019 Recognition for an assumed liability in a revenue contract under ASC 805, Business Combinations Modify disclosures for employers that sponsor defined benefit pension or other postretirement plans Modify disclosures for fair value measurements Simplify the balance sheet classification of debt Under the new guidance, including amendments, lessees will be required to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a capital or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance sheet, the guidance in the ASU will require both types of leases to be recognized on the balance sheet. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements (with potential relief permitting a cumulative effect in the period of adoption pending FASB approval - see later discussion). The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented, and provides for certain other practical expedients. Lessees and lessors may not apply a full retrospective transition approach. SECOND QUARTER UPDATE (PUBLIC COMPANY)

7 The FASB is expected to issue two more amendments in the third quarter to simplify certain aspects of the guidance as follows: Allow for the option to adopt using a cumulative-effect adjustment to retained earnings as of January 1, 2019 (calendar year-end companies) Provide a practical expedient to allow lessors to treat certain leases with multiple components as a single lease In April 2018, the CAQ issued, Preparing for the Leases Accounting Standard: A Tool for Audit Committees [ to help audit committees exercise their oversight responsibilities as companies implement the new leases accounting standard. The tool includes an overview of the new standard and offers important questions for audit committee members to consider for successful implementation. Implementation of the leases standard is a significant effort and will affect multiple functional areas of an organization, including (but not limited to) accounting, tax, financial reporting, financial planning and analysis, investor relations, treasury (e.g., debt covenants), operations, procurement, legal, information technology, and real estate. It also involves judgments and estimates, thoughtful reassessment of accounting policies, and new required disclosures. This tool provides important questions to consider, such as the following: How will accounting for leases change? Is the company on track for successful implementation? How is the company preparing investors and creditors to understand the impact to the company and its financial reporting? Are new processes and controls being developed to address the accuracy of the adoption of and ongoing accounting required by the standard? Are the appropriate disclosures being developed? s Measurement of Credit Losses on Financial Instruments As a reminder, ASU , Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, changes the impairment model to a current expected credit loss ( CECL ) model and will require an entity to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. As a result, entities will need to incorporate forward-looking information to better form their credit loss estimates and credit losses will generally be recognized earlier when a current expected credit loss exists. The new guidance also permits the restoration of prior credit losses on available-for-sale-debt securities in circumstances where the estimate of credit losses has declined. Entities will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU was discussed in our 2016 Second Quarter Update Newsletter. The ASU is effective for SEC filers fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). For public companies that are not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the ASU will take effect for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, The FASB established a transition resource group (TRG) to solicit, analyze and discuss implementation issues related to the new credit impairment standard. The group has discussed various topics of interest and the meeting materials can be accessed on the FASB website. The tool is also very useful to management teams as they implement the standard and coordinate the process with their audit committee and auditors. SECOND QUARTER UPDATE (PUBLIC COMPANY)

8 s Standards Issued in 2018 Final ASU Update Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made Update Compensation Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting Update Codification Improvements to Topic 942, Financial Services Depository and Lending Update Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update) Update Investments Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No (SEC Update) Update Technical Corrections and Improvements to Financial Instruments Overall (Subtopic ): Recognition and Measurement of Financial Assets and Financial Liabilities Update Income Statement Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income Update Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842 Early Adoption, if ASU adopted N/A N/A N/A, if ASU adopted Effective Date Nonpublic entities that serve as a resource recipient: annual periods beginning after within fiscal years beginning after December 15, Nonpublic entities that serve as a resource provider; annual periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, Public business entities that serve as a resource recipient: annual periods beginning after June 15, 2018, and interim periods within those fiscal years.* Public business entities that serve as a resource provider: annual periods beginning after within those fiscal years. December 15, 2019 and interim periods beginning after December 15, beginning after December 15, 2018 and interim periods within those fiscal years. Upon addition to FASB codification*, ** Upon addition to FASB codification** Upon addition to FASB codification*, ** See ASU ** Fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. See ASU * Effective 2018 for nonpublic companies ** Effective 2018 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

9 s Standards Issued in Prior Years Effective 2018 or After Final ASU Update Codification Improvements to Topic 995, U.S. Steamship Entities: Elimination of Topic 995 Update Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842) Update Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities 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 Early Adoption Effective Date Fiscal years and first interim periods beginning after December 15, December 15, 2019, and interim periods beginning after December 15, beginning after December 15, 2018, and interim periods within those fiscal years. Part I: December 15, 2019, and interim periods beginning after December 15, beginning after December 15, 2018, and interim periods within those fiscal years. Part II: No transition guidance is required as no accounting impact exists. Fiscal years beginning after December 15, *,** December 15, 2019, and interim periods beginning after December 15, beginning after December 15, 2018, and interim periods within those fiscal years. within fiscal years beginning after beginning after December 15, 2017, and interim periods within those fiscal years. ** Fiscal years beginning after December 15, * Effective 2018 for nonpublic companies ** Effective 2018 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

10 s Standards Issued in Prior Years Effective 2018 or After (continued) Final ASU 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 Business Combinations (Topic 805): Clarifying the Definition of a Business Update No Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Update No Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) Update No Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory 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 Early Adoption Effective Date December 15, Public business entities that are SEC filers: fiscal years beginning after All other public business entities: fiscal years beginning after December 15, within fiscal years beginning after beginning after December 15, 2017, and interim periods within those fiscal years.** within fiscal years beginning after beginning after December 15, 2017, and interim periods within those fiscal years.** beginning after December 15, 2017, including interim periods within those fiscal years.** within fiscal years beginning after beginning after December 15, 2017, and interim periods within those fiscal years.** Nonpublic only: annual financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.* * Effective 2018 for nonpublic companies ** Effective 2018 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

11 s Standards Issued in Prior Years Effective 2018 or After (continued) Final ASU 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 Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments Update No Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships Early Adoption, as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years See ASUs and Effective Date 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, 2018.* beginning after December 15, 2016, including interim periods within those fiscal years. December 15, 2017, and interim periods December 15, 2018.* beginning after December 15, 2016, including interim periods within those fiscal years. December 15, 2017, and interim periods December 15, 2018.* beginning after December 15, 2016, including interim periods within those fiscal years. * Effective 2018 for nonpublic companies ** Effective 2018 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)

12 s Standards Issued in Prior Years Effective 2018 or After (continued) Final ASU 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 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Update No Revenue from Contracts with Customers (Topic 606) Early Adoption, for certain amendments, under certain circumstances Effective Date 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 within fiscal years beginning after December 15, 2018.* beginning after December 15, 2016, including interim periods within those fiscal years. 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.** * Effective 2018 for nonpublic companies ** Effective 2018 for public business entities SECOND QUARTER UPDATE (PUBLIC COMPANY)