Illustrative Disclosures for Recently Issued Accounting Pronouncements For the Quarter Ended June 30, 2014 The illustrative disclosures below are presented in plain English. Please review each disclosure for its applicability to your organization and the need for disclosure in your organization s financial statements. {Please give careful consideration to appropriateness of bold text.} Applicable to all companies that report items of other comprehensive income: In June 2011, the FASB amended the Comprehensive Income topic of the Accounting Standards Codification. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments [were/will be] effective for the Company on a prospective basis for reporting periods beginning after [December 15, 2012-public companies][december 15, 2013-private companies]. [Early adoption is permitted-private companies]. [These amendments did not have a material effect on the Company s financial statements/the Company does not expect these amendments to have a material effect on its financial statements]. Applicable to companies with obligations resulting from joint and several liability arrangements: In February 2013, the FASB amended the Liabilities topic of the Accounting Standards Codification to address obligations resulting from joint and several liability arrangements. The guidance addresses recognition of financial commitments arising from joint and several liability arrangements. Specifically, the amendments require recognition of financial commitments arising from loans, contracts, and legal rulings if the Company can be held liable for the entire claim. The amendments will be effective for the Company for reporting periods [beginning after December 15, 2013-public companies or ending after December 15, 2014-private companies]. The Company does not expect these amendments to have a material effect on its financial statements.
Applicable to all: In April 2013, the FASB issued guidance addressing application of the liquidation basis of accounting. The guidance is intended to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments will be effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein and those requirements should be applied prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Company does not expect these amendments to have any effect on its financial statements. Applicable to companies with an unrecognized tax benefit when a Loss or credit carryforward, or similar tax loss exists: In July 2013, the FASB issued guidance to eliminate the diversity in practice regarding presentation of unrecognized tax benefits in the statement of financial position. Under the clarified guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, will be presented in the financial statements as a reduction to a deferred tax asset unless certain criteria are met. The requirements should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments will be effective for the Company for reporting periods [beginning after December 15, 2013-public companies][beginning after December 15, 2014- private companies]. The Company does not expect these amendments to have a material effect on its financial statements. Applicable to all: In December 2013, the FASB amended the Master Glossary of the FASB Codification to define Public Business Entity to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. GAAP. The amendment does not affect existing requirements, however the definition will be used by the FASB, the Private Company Council ( PCC ), and the Emerging Issues Task Force ( EITF ) in specifying the scope of future financial accounting and reporting guidance. The Company does not expect this amendment to have any effect on its financial statements. Applicable to companies that have investments in qualified affordable housing projects: In January 2014, the FASB amended the Equity Method and Joint Ventures topic of the Accounting Standards Codification. The amendments provide criteria that must be met in order to apply a proportional amortization method to Low-Income Housing Tax Credit investments and provide guidance on the method used to amortize the investment, the impairment approach, and the eligibility criteria for entities that have other arrangements (e.g., loans) with the limited liability entity. The amendments will be effective for the Company for new investments in qualified affordable housing projects for [interim and annual periods beginning after December 15, 2014-public companies][ annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-private companies]. [For existing investments in qualified affordable housing projects, the Company will apply the proportional amortization method retrospectively.] [The Company intends to continue using the effective yield method for existing investments in qualified affordable housing
projects.] [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to private companies that elect to amortize goodwill: In January 2014, the FASB amended the Intangibles Goodwill and Other topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to amortize goodwill on a straight-line basis over a period of ten years or over a shorter period if the company demonstrates that another useful life is more appropriate. Goodwill would be subject to impairment testing only upon the occurrence of a triggering event. The amendments will be effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The alternative is applied on a prospective basis, with amortization of existing goodwill commencing at the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its financial statements. Applicable to private companies, other than financial institutions, that elect to use the simplified hedge accounting approach: In January 2014, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to use a simplified hedge accounting approach for its receive-variable, pay-fixed interest rate swaps. Under this approach, the income statement charge for interest expense will be similar to the amount that would result if the company had directly entered into a fixed-rate borrowing instead of a variable-rate borrowing and an interest rate swap. Furthermore, the simplified hedge accounting approach allows the swap to be measured at its settlement value, which measures the swap without non-performance risk, instead of fair value. The amendments will be effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The Company will apply the simplified hedge accounting approach [retrospectively] [using a modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements. Applicable to private companies, other than financial institutions, that elect to use the simplified hedge accounting approach: In January 2014, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to use a simplified hedge accounting approach for its receive-variable, pay-fixed interest rate swaps. Under this approach, the income statement charge for interest expense will be similar to the amount that would result if the company had directly entered into a fixed-rate borrowing instead of a variable-rate borrowing and an interest rate swap. Furthermore, the simplified hedge accounting approach allows the swap to be measured at its settlement value, which measures the swap without non-performance risk, instead of fair value. The amendments will be effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The Company will apply the simplified hedge accounting approach
[retrospectively] [using a modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements. Applicable to companies that have mortgage loans collateralized by residential real estate: In January 2014, the FASB amended Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (OREO). In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments will be effective for the Company for [annual periods, and interim periods within those annual period beginning after December 15, 2014-public companies] [annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-private companies], with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company will apply the amendments [prospectively] [using a modified retrospective approach]. [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to companies that have service concession arrangements with a public sector entity: In January 2014, the FASB issued guidance to eliminate the diversity in practice regarding service concession arrangements with a public sector entity. The guidance provides criteria for determining whether an arrangement will qualify as a service concession arrangement and prohibits accounting for these arrangements as leases. The amendments will be effective for the Company for [annual periods, and interim periods within those annual period beginning after December 15, 2014-public companies] [annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-private companies], with early implementation of the guidance permitted. [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to private companies that elect to not apply VIE guidance: In March 2014, the FASB amended the Consolidation topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity has the option to exempt itself from applying the VIE consolidation model to a qualifying common control leasing arrangement. The amendments will be effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The Company will apply a full retrospective approach in which financial statements for each individual prior period
presented and the opening balances of the earliest period presented are adjusted to reflect the periodspecific effects of applying the amendments. Applicable to companies that have new disposals and new classifications of disposal groups as held for sale: In April 2014, the FASB issued guidance to change the criteria for reporting a discontinued operation. Under the new guidance, a disposal of part of an organization that has a major effect on its operations and financial results is a discontinued operation. The amendments will be effective for the Company for [annual periods, and interim periods within those annual period beginning after December 15, 2014- public companies and not-for-profit entities that issue securities or are conduit bond obligors] [annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-all other entities], with early implementation of the guidance permitted. [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to all: In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for [reporting periods beginning after December 15, 2016-public business entities] [annual periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2018-all other entities]. The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to development stage entities: In June 2014, the FASB issued guidance which eliminates the concept of a development stage entity. Accordingly, the incremental reporting requirements for a development stage entity, including inception-to-date information, will no longer apply. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2014, except for certain consolidation requirements which are effective one year later-public business entities] [annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015, except for certain consolidation requirements which are effective two years later-all other entities], with early implementation of the amendments permitted. The Company will apply the guidance using a retrospective approach, except for certain disclosure requirements which will be applied prospectively. [The Company does not expect these amendments to have a material effect on its financial statements].
Applicable to companies with repurchase agreements: In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for [the first interim or annual period beginning after December 15, 2014- public business entities] [annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015-all other entities]. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. [The Company does not expect these amendments to have a material effect on its financial statements]. Applicable to all: Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company s financial position, results of operations or cash flow.