Financial reporting briefs

Financial reporting briefs In this issue: Top story... 2 Accounting update... 3 Regulatory developments... 5 Other considerations... 6 Effective date highlights... 7 Reference library... 10 What you need to know about this quarter s accounting, financial reporting and other developments March 2018

Top story Welcome to the March 2018 Financial reporting briefs. This edition highlights the latest developments in financial reporting and alerts you to some important considerations for 2018. Interested in the accounting for the effects of tax reform? We ve got it covered in our Top story. Our Accounting update section includes reminders on the new revenue and leases standards. In our Regulatory developments section, we provide updates on activities at the SEC. Our Other considerations section provides you with a summary of open comment periods. Need more information? Check out our Reference library, where we list our recent publications on the topics discussed here and provide links to them. Accounting for the effects of tax reform The Tax Cuts and Jobs Act is the most significant change in federal income tax law in more than 30 years, and entities continue to focus on accounting for its effects. Under guidance from the staffs of the Securities and Exchange Commission (SEC or Commission) and the Financial Accounting Standards Board (FASB), all entities can report provisional amounts as they work to complete their accounting for each of the Act s effects, but they need to make certain disclosures. Entities should not underestimate the effort needed to appropriately interpret and apply all provisions of the Act before concluding that their accounting for its enactment-date effects is complete. In accordance with SEC Staff Accounting Bulletin (SAB) 118, entities that elect to record provisional amounts must base them on reasonable estimates and may adjust those amounts for a period of up to a year after the 22 December 2017 enactment date. Entities that elect to record provisional amounts need to consider the disclosure requirements in SAB 118. Entities also need to consider the effects of the new tax law when they estimate their annual effective tax rate in the first quarter and project the deferred tax effects of expected year-end temporary differences. In addition to applying the new corporate income tax rate, an entity will need to consider whether it has elected to reflect global intangible low-taxed income (GILTI) as a period cost or as part of deferred taxes. Entities that haven t yet finalized a GILTI accounting policy should not compute its estimated annual effective tax rate with GILTI as part of its deferred taxes. In addition, entities need to consider guidance the FASB issued and the views the FASB staff expressed in response to questions raised by stakeholders. The FASB amended US GAAP to give entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings. The FASB staff provided its views on the following topics: (1) whether to discount the tax liability on the deemed repatriation of earnings, (2) accounting for GILTI, (3) accounting for the base erosion anti-abuse tax, (4) whether to discount alternative minimum tax credits that become refundable, and (5) whether private companies and not-for-profit entities can apply SAB 118. As entities work on finalizing their accounting, they should monitor developments, including notices issued by the US Treasury Department and the Internal Revenue Service that may clarify how to apply certain provisions of the Act. 2 Financial reporting briefs March 2018

Accounting update Don t forget about leases The new leases standard is effective for calendar-year public business entities (PBEs) and certain other entities in 2019, and these entities should not underestimate the time and resources necessary to implement it. Entities need to make sure they have in place robust processes to determine whether their population of leases is complete. While completeness is not a new issue, it will be more important because entities will have to record assets and liabilities for operating leases that they may account for as service contracts today. Many entities are finding that their existing information technology (IT) systems aren t adequate to support the transition and prospective accounting for leases under the new standard. If an entity has not yet made significant progress on its implementation activities, it should refocus its efforts in the near term. As a reminder, in the periods leading up to adoption, SEC registrants must make transition disclosures about the anticipated effect of the standard on their financial statements and the state of their implementation efforts. The standard requires the use of a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements. For leases that exist at or commence after the beginning of the earliest comparative period presented, an entity may need to adjust (1) equity at the beginning of the earliest comparative period presented and (2) amounts recorded in the comparative periods presented in the financial statements. However, the FASB has proposed a transition option that would allow entities to continue to apply the legacy guidance in Accounting Standards Codification (ASC) 840, including its disclosure requirements, in the comparative periods in the year they adopt the new leases standard. An entity that elects the option would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The FASB also proposed a practical expedient that would provide lessors with an option to combine lease and non-lease components when certain criteria are met. The FASB separately issued guidance to provide an optional transition practical expedient for land easements that permits an entity to continue applying its current policy for accounting for certain land easements that exist as of or expire before the effective date of ASC 842. Reminders about new revenue disclosures and controls The SEC staff expects registrants to provide the annual and interim period disclosures required by the new revenue standard in each quarterly report they file in the first year of adoption. The disclosures required by the standard are intended to provide sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard requires new comprehensive disclosures, including both qualitative and quantitative information about: Contracts with customers These disclosures include disaggregation of revenue and information about contract assets and liabilities and an entity s performance obligations. Significant judgments (including changes in judgments) made in applying the standard These include disclosures about significant judgments and estimates that affect the determination of the transaction price, the allocation of the transaction price to performance obligations and the determination of the timing of satisfaction of performance obligations. Assets recognized resulting from costs to obtain or fulfill a contract with a customer These include disclosures about the assets recognized and how those assets are subsequently amortized or impaired. Some companies may find it challenging to identify the categories for the disaggregated revenue disclosures. While the standard does not specify how revenue should be disaggregated, the implementation guidance suggests categories for entities to consider (e.g., type of good or service, geographical location). The implementation guidance also indicates that the most appropriate categories for a particular entity 3 Financial reporting briefs March 2018

Accounting update depend on its facts and circumstances, and the entity should consider how it disaggregates revenue in other communications (e.g., press releases, information regularly reviewed by the chief operating decision maker) when determining which categories are most relevant and useful. As a reminder, an entity needs to make sure its system of internal control over financial reporting addresses (1) the new judgments and estimates management has to make to apply the standard and (2) any new or modified IT systems it has implemented. Management also should have in place a plan to monitor the new controls it has implemented and those it modified to address the risks related to adoption and ongoing reporting under the standard. Amended guidance on recognizing and measuring financial instruments The FASB amended the new guidance on recognizing and measuring financial instruments that calendaryear PBEs adopted on 1 January 2018 to clarify that entities use a prospective transition approach only for equity securities they elect to measure using the new measurement alternative. The amendments also clarify that an entity that voluntarily discontinues using the measurement alternative for an equity security without a readily determinable fair value must measure that security and all identical or similar investments of the same issuer at fair value. This election is irrevocable and will apply to all future purchases of identical or similar investments of the same issuer. The amendments, which clarify other aspects of the guidance on how to apply the measurement alternative and the presentation requirements for financial liabilities measured under the fair value option, are effective for calendar-year PBEs for annual periods beginning in 2018 and interim periods beginning in the third quarter of 2018. Early adoption by all entities, including adoption in an interim period, is permitted for fiscal years beginning after 15 December 2017, provided the new guidance on recognizing and measuring financial instruments has been adopted. Proposed guidance on cloud computing arrangements The FASB proposed requiring a customer in a cloud computing arrangement (i.e., a hosting arrangement) that is a service contract to follow the guidance in ASC 350-40 on internal-use software to determine which implementation costs to defer and recognize as an asset. The proposal, which is based on a consensus-for-exposure of the Emerging Issues Task Force, would align the guidance on recognizing implementation costs incurred in a hosting arrangement that is a service contract with the guidance for implementation costs incurred in an arrangement that includes an internal-use software license. Under the proposal, entities would defer certain implementation costs incurred during the application development stage (e.g., costs of integration with on-premises software, coding, configuration, customization). Entities would expense other costs as incurred (e.g., project planning, training, maintenance after implementation, data conversion). Entities would also have to make new disclosures about implementation costs for both internal-use software and hosting arrangements. Comments are due by 30 April 2018. Implementation issues related to new hedge accounting guidance The FASB recently discussed the following implementation issues related to its new hedge accounting guidance: general technical inquiries, the intended scope of the guidance on prepayable instruments and the accounting for net investment hedges under the spot method when a cross-currency interest rate swap is used as the hedging instrument. The FASB s staff has posted additional information about its interpretation of the guidance on prepayable instruments on the FASB website. The FASB plans to discuss more implementation issues at future meetings and acknowledged that certain of these issues may also require clarification of the guidance. Proposal would add a new benchmark rate for hedge accounting The FASB proposed adding the overnight index swap rate based on the Secured Overnight Financing Rate (SOFR) to the list of US benchmark interest rates in ASC 815 that are eligible to be hedged. SOFR was identified as the preferred reference rate alternative to the London Interbank Offered Rate in the US by a committee convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The proposal would allow entities to designate changes in this rate as the hedged risk in hedges of interest rate risk for fixed-rate financial instruments. Comments are due by 30 March 2018. 4 Financial reporting briefs March 2018

Regulatory developments New SEC commissioners sworn in Robert Jackson, Jr. and Hester Peirce were sworn in as commissioners of the SEC, giving the Commission a full slate of five commissioners for the first time since 2015. Mr. Jackson, a Democrat, previously served as a Columbia University law professor and director of the school s Program on Corporate Law and Policy and as a Treasury Department adviser. Ms. Peirce, a Republican, was a senior research fellow and director of the Financial Markets Working Group at the Mercatus Center at George Mason University. She also previously served as senior counsel for the Senate Committee on Banking. SEC issues guidance on cybersecurity The SEC issued interpretive guidance on cybersecurity disclosure requirements that goes beyond the 2011 staff guidance by addressing the importance of insider trading prohibitions and the application of disclosure controls and procedures to cybersecurity risks and incidents. The Commission s new guidance largely incorporates the staff s previous guidance on cybersecurity disclosures. The new guidance expands the existing disclosure guidance to address how the board of directors oversees the management of cybersecurity risk, as well as management s discussion and analysis of how cybersecurity incidents affected reportable segments, among other things. Companies to make first pay ratio disclosures With proxy season approaching, companies will have to disclose for the first time the ratio of the annual total compensation of the chief executive officer or other principal executive officer to the median of the annual total compensation of all other employees. Companies should make sure they have a reasonable methodology to identify and calculate the compensation of their median employee. The methodology, including any assumptions used, should be clearly and contemporaneously documented in the company s policies and consistently applied from year to year, so it s important to have appropriate documentation this first year. Companies should also design and implement appropriate controls over their pay ratio disclosures. As a best practice, companies may also provide an explanation of the ratio that addresses questions they anticipate from external and internal stakeholders. Concerns about initial coin offerings and cryptocurrencies SEC Chairman Jay Clayton has been warning investors about the risks of investing in initial coin offerings (ICOs). He has provided questions that investors should ask before considering an investment in ICOs. He also reminded gatekeepers and others, including securities lawyers, accountants and consultants, that they need to focus on their responsibilities to make sure that their actions with regard to cryptocurrencies do not violate federal securities laws. He recently noted that no ICOs have been registered with the SEC, and the SEC also has not approved any exchange-traded products (e.g., exchange-traded funds) holding cryptocurrencies or other crypto assets. The cyber unit of the SEC s Division of Enforcement has been actively investigating possible federal securities law violations involving distributed ledger technology and ICOs. SEC officials have also expressed concerns about companies making misleading statements about strategies involving blockchain technology or ICOs. 5 Financial reporting briefs March 2018

Other considerations Summary of open comment periods Items are FASB proposals unless otherwise noted. Proposal Derivatives and Hedging (Topic 815): Inclusion of the Overnight Index Swap (OIS) Rate Based on the Secured Overnight Financing Rate (SOFR) as a Benchmark Interest Rate for Hedge Accounting Purposes Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract; Disclosures for Implementation Costs Incurred for Internal-Use Software and Cloud Computing Arrangements (a consensus of the FASB Emerging Issues Task Force) SEC Investment Company Liquidity Disclosure Comment period ends 30 March 2018 30 April 2018 18 May 2018 6 Financial reporting briefs March 2018

Effective date highlights Note: Early adoption generally is permitted unless otherwise noted. Effective in 2018 for public 1 calendar year-end entities 2 ASU 2018-05 ASU 2018-04 Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update) 3 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. 33-9273 (SEC Update) 3 ASU 2018-03 Technical Corrections and Improvements to Financial Instruments Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities ASU 2017-14 Income Statement Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) (SEC Update) 3 ASU 2017-13 Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments (SEC Update) 3 ASU 2017-10 ASU 2017-09 ASU 2017-07 ASU 2017-05 Service Concession Arrangements (Topic 853), Determining the Customer of the Operation Services Compensation Stock Compensation (Topic 718), Scope of Modification Accounting Compensation Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets See SAB 118. Amendments to ASC 320: Effective upon adoption of the amendments in ASU 2016-01. Amendments to ASC 980: See SEC Release No. 33-9273. periods within those fiscal years beginning after 15 June 2018. Amendments to ASC 606 and ASC 842: Effective upon announcement. Amendments to ASC 605: Effective upon adoption of the amendments in ASU 2014-09. Amendments to ASC 840: Effective upon adoption of the amendments in ASU 2016-02. Entities that have not yet adopted ASC 606: Effective upon adoption of the amendments in ASU 2014-09. Entities that have adopted ASC 606: Effective for fiscal years beginning after 15 December 2017, including interim periods within those fiscal years. Effective for annual periods, including interim periods within those annual periods, beginning after 15 December 2017. Effective for annual periods beginning after 15 December 2017, including interim periods within those annual periods. ASU 2017-01 Business Combinations (Topic 805), Clarifying the Definition of a Business Effective for annual periods beginning after 15 December 2017, including interim periods within those periods. ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers ASU 2016-18 Statement of Cash Flows (Topic 230), Restricted Cash periods within those fiscal years. ASU 2016-16 Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ASU 2016-14 Not-for-Profit Entities (Topic 958), Presentation of Financial Statements of Not-for-Profit Entities ASU 2016-12 Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815), Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update) 3 ASU 2016-10 ASU 2016-08 ASU 2016-04 ASU 2016-01 Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Liabilities Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products Financial Instruments Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities Effective for annual reporting periods beginning after 15 December 2017, including interim reporting periods within those annual reporting periods. periods within those fiscal years. periods within fiscal years beginning after 15 December 2018. Amendments to ASC 815: Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2015. Amendments to ASC 605 and ASC 932: Effective upon adoption of the amendments in ASU 2014-09. periods within those fiscal years. Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2017. Earlier application is prohibited except for the presentation guidance in ASC 825-10-45-5 through 45-7. ASU 2014-09 Revenue from Contracts with Customers (Topic 606) Effective for annual reporting periods beginning after 15 December 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after 15 December 2016, including interim reporting periods within that reporting period. 4 1 Refer to each Accounting Standards Update (ASU) to determine which types of entities (e.g., public business entities, not-for-profits, employee benefit plans) are subject to these effective dates. 2 The Jumpstart Our Business Startups Act allows emerging growth companies to follow private company effective dates for new or revised accounting standards issued after 5 April 2012. However, an emerging growth company must follow public company effective dates for all such standards if it has disclosed an election to do so. 3 This ASU adds or amends SEC paragraphs in the Codification that describe SEC guidance or SEC staff views that the FASB includes as a convenience to Codification users. 4 ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, provided a one-year deferral of the effective date for the new revenue standard for public and nonpublic entities reporting under US GAAP. 7 Financial reporting briefs March 2018

Effective date highlights Effective after 2018 for public 1 calendar year-end entities 2 ASC 2018-02 Income Statement Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ASU 2018-01 Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842 ASU 2017-15 Codification Improvements to Topic 995, U.S. Steamship Entities, Elimination of Topic 995 ASU 2017-12 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018. Effective upon adoption of the amendments in ASU 2016-02. Effective for fiscal years and first interim periods beginning after 15 December 2018. Effective for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years. ASU 2017-11 Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity Amendments in Part I: Effective for fiscal years beginning after 15 December (Topic 480); Derivatives and Hedging (Topic 815), (Part I) Accounting for 2018, including interim periods within those fiscal years. Certain Financial Instruments with Down Round Features, (Part II) Amendments in Part II: Transition is not required. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception ASU 2017-08 Receivables Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities ASU 2017-06 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 ASU 2017-04 Intangibles Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment ASU 2016-13 Financial Instruments Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ASU 2016-02 Leases (Topic 842) Effective in 2018 for nonpublic 5 calendar year-end entities ASU 2017-09 Compensation Stock Compensation (Topic 718), Scope of Modification Accounting Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018. Effective for fiscal years beginning after 15 December 2018. Public business entities that meet the definition of an SEC filer: Effective for annual and any interim impairment tests performed for periods beginning after 15 December 2019. Other public business entities: Effective for annual and any interim impairment tests performed for periods beginning after 15 December 2020. Public business entities that meet the definition of an SEC filer: Effective for fiscal years beginning after 15 December 2019, including interim periods within those years. Other public business entities: Effective for fiscal years beginning after 15 December 2020, including interim periods within those fiscal years. Earlier application is permitted only for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years. Effective for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years. Effective for annual periods, including interim periods within those annual periods, beginning after 15 December 2017. ASU 2016-19 Technical Corrections and Improvements Effective upon issuance (14 December 2016) for amendments that do not have transition guidance. Amendments to ASC 350-40: Effective for annual periods beginning after 15 December 2017, and interim periods in annual periods beginning after 15 December 2018. Other amendments that are subject to transition guidance: Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2016. ASU 2016-14 ASU 2016-09 ASU 2016-06 ASU 2016-05 Not-for-Profit Entities (Topic 958), Presentation of Financial Statements of Not-for-Profit Entities Compensation Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships periods within fiscal years beginning after 15 December 2018. periods within fiscal years beginning after 15 December 2018. periods within fiscal years beginning after 15 December 2018. periods within fiscal years beginning after 15 December 2018. ASU 2015-17 Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes Effective for annual periods beginning after 15 December 2017, and interim periods within annual periods beginning after 15 December 2018. 5 Refer to each ASU to determine which types of entities (e.g., private companies, not-for-profits, employee benefit plans) are subject to these effective dates. 8 Financial reporting briefs March 2018

Effective date highlights Effective after 2018 for nonpublic 5 calendar year-end entities ASU 2018-03 Technical Corrections and Improvements to Financial Instruments Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities ASC 2018-02 Income Statement Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ASU 2018-01 ASU 2017-15 ASU 2017-12 Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842 Codification Improvements to Topic 995, U.S. Steamship Entities, Elimination of Topic 995 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities ASU 2017-11 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 ASU 2017-10 Service Concession Arrangements (Topic 853), Determining the Customer of the Operation Services ASU 2017-08 Receivables Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities ASU 2017-07 ASU 2017-06 ASU 2017-05 ASU 2017-04 Compensation Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost 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 Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets Intangibles Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. Early adoption is not permitted unless the entity has early adopted the amendments in ASU 2016-01. Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018. Effective upon adoption of the amendments in ASU 2016-02. Effective for fiscal years and first interim periods beginning after 15 December 2018. Effective for fiscal years beginning after 15 December 2019, and interim periods beginning after 15 December 2020. Amendments in Part I: Effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Amendments in Part II: Transition is not required. Entities that have not yet adopted ASC 606: Effective upon adoption of the amendments in ASU 2014-09. Entities that have adopted ASC 606: Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. Effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Effective for annual periods beginning after 15 December 2018, and interim periods within annual periods beginning after 15 December 2019. Effective for fiscal years beginning after 15 December 2018. Effective for annual and any interim impairment tests performed for periods beginning after 15 December 2021. ASU 2017-01 Business Combinations (Topic 805), Clarifying the Definition of a Business Effective for annual periods beginning after 15 December 2018, and interim periods within annual periods beginning after 15 December 2019. ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers ASU 2016-18 Statement of Cash Flows (Topic 230), Restricted Cash Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. ASU 2016-16 ASU 2016-15 ASU 2016-13 ASU 2016-12 ASU 2016-10 ASU 2016-08 ASU 2016-04 Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments Financial Instruments Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Liabilities Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products Effective for annual reporting periods beginning after 15 December 2018, and interim reporting periods within annual reporting periods beginning after 15 December 2019. Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. Effective for fiscal years beginning after 15 December 2020, and interim periods within fiscal years beginning after 15 December 2021. Earlier application is permitted only for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years. Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. ASU 2016-02 Leases (Topic 842) Effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. ASU 2016-01 Financial Instruments Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. Application prior to the effective date for public business entities is prohibited, except for the presentation guidance in ASC 825-10-45-5 through 45-7 and the provision in ASC 825-10-65-2 that eliminates the fair value disclosures for financial instruments required by the General Subsection of ASC 825-10-50. ASU 2014-09 Revenue from Contracts with Customers (Topic 606) Effective for annual reporting periods beginning after 15 December 2018, and interim reporting periods within annual reporting periods beginning after 15 December 2019. Application prior to the original effective date for public entities is prohibited. 4 9 Financial reporting briefs March 2018

Reference library Click on any of the EY publications below, all of which are available free of charge on AccountingLink at www.ey.com/us/accountinglink. To the Point FASB proposes guidance on accounting for implementation costs in cloud computing arrangements (1 March 2018) FASB amends new guidance on recognizing and measuring financial instruments (28 February 2018) Proposal would add a new benchmark interest rate for hedge accounting (22 February 2018) FASB issues guidance on reclassification from OCI of tax effects related to tax reform (15 February 2018) FASB moves ahead with guidance on reclassification of tax effects stranded in OCI by tax reform (7 February 2018) FASB issues transition practical expedient for land easements and clarification on applying ASC 842 (25 January 2018) FASB revises proposal to amend new guidance on recognizing and measuring financial instruments (23 January 2018) FASB staff to publish its views on tax reform accounting issues, FASB proposes guidance on related issue (18 January 2018) FASB discusses accounting issues arising from tax reform (10 January 2018) FASB proposes adding transition option and practical expedient for lessors to new leases standard (9 January 2018) President Trump signs tax reform into law (22 December 2017) Technical Line A closer look at accounting for the effects of the Tax Cuts and Jobs Act (16 March 2018) A closer look at the new guidance on recognizing and measuring financial instruments (15 March 2018) A closer look at the FASB s new hedge accounting standard (28 February 2018) SEC staff provides guidance on accounting for the effects of US tax reform (4 January 2018) Financial reporting developments Business combinations (7 February 2018) Accounting for certain life insurance and annuity products (25 January 2018) Lease accounting Accounting Standards Codification 842, Leases (10 January 2018) Asset retirement obligations (28 December 2017) Certain investments in debt and equity securities (prior to the adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities) (20 December 2017) Impairment or disposal of long-lived assets (19 December 2017) Comment letters FASB proposal to add a transition option and practical expedient for lessors to the new leases standard (5 February 2018) Reclassification of stranded tax effects (2 February 2018) SEC s proposal to modernize and simplify Regulation S-K (2 January 2018) Other Pacesetters in Financial Reporting: Takeaways from the 2017 conference hosted by Pace University, FEI and EY (1 March 2018) US GAAP/IFRS accounting differences identifier tool (February 2018) US GAAP versus IFRS: The basics (February 2018) SEC Reporting Update, SEC issues guidance on cybersecurity (22 February 2018) Guide to preparing carve-out financial statements (29 January 2018) 2017 Standard Setter Update, Financial reporting and accounting developments (22 January 2018) Board Matters Quarterly (January 2018) EITF Update (January 2018) SEC in Focus (January 2018) Quarterly tax developments (December 2017) On-demand webcasts EY Q1 2018 financial reporting update Accounting for income taxes: a quarterly perspective Tax revenue recognition series Upcoming webcasts Tax administration goes digital: Preparing for a new era of digital engagement with tax administrations EY Assurance Tax Transactions Advisory 2018 Ernst & Young LLP. All Rights Reserved. SCORE No.01499-181US ey.com/us/accountinglink About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. 10 Financial reporting briefs March 2018