December 2014 In this issue: Top story... 2 Accounting update... 3 Regulatory developments... 6 Other considerations... 8 Effective date highlights... 9 Reference library... 11 Financial reporting briefs Life sciences What you need to know about this quarter s accounting, financial reporting and other developments
Top story Welcome to the December 2014 Financial reporting briefs life sciences. This edition highlights the latest developments in financial reporting for the life sciences industry and alerts you to some important considerations for 2014. Interested in what happened at the AICPA National Conference on Current SEC and PCAOB Developments? We ve got it covered in our Top story. Our Accounting update section highlights the latest developments at the FASB and some yearend reminders. In our Regulatory developments section, we offer other insights about the SEC and the PCAOB. Our Other considerations section provides you with other news from the quarter and 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. AICPA National Conference on Current SEC and PCAOB Developments Representatives of the Securities and Exchange Commission (SEC or Commission), the Financial Accounting Standards Board (FASB or Board) and the International Accounting Standards Board (IASB) (collectively, the Boards) and the Public Company Accounting Oversight Board (PCAOB) shared their views on various accounting, financial reporting and auditing issues at the annual AICPA National Conference on Current SEC and PCAOB Developments in Washington, DC. Highlights included: Another possible IFRS alternative for US registrants James Schnurr, the new SEC Chief Accountant, said he is exploring the possibility of allowing US registrants to voluntarily disclose IFRS financial information as a supplement to their US GAAP financial statements and asked for feedback. He said he hopes to make a recommendation to the Commission in the near future about whether and how to further incorporate IFRS into the US financial reporting system. New revenue recognition standard Representatives of the SEC, the FASB and the IASB discussed efforts to implement the new revenue recognition standard that the FASB and the IASB issued earlier this year. Many have raised specific application questions that they would like addressed before making the necessary process and system changes. The Boards are reaching out to companies to better understand implementation challenges and the FASB is considering whether to propose delaying the effective date of its standard. Disclosure effectiveness and simplification Representatives of the SEC provided an update on the Commission s disclosure effectiveness initiative, highlighting key focus areas related to Regulations S-X and S-K. FASB officials discussed the Board s simplification and disclosure initiatives and discussed how the Board analyzes costs and benefits of new standards. In several panels, preparers, auditors, lawyers and standard setters discussed ways to make disclosures more effective under existing rules. PCAOB matters PCAOB representatives discussed recent standard-setting efforts related to both audit performance and auditor reporting standards. SEC representatives questioned the slow pace of the PCAOB s standard-setting process and urged the PCAOB to focus on audit performance standards. PCAOB representatives said they are looking for ways to make their standard-setting process more efficient. They also provided updates on audit firm inspections, enforcement matters and initiatives to measure audit quality. Internal control over financial reporting SEC representatives discussed internal control over financial reporting and emphasized the need for management to appropriately evaluate control deficiencies. SEC representatives continued to question whether companies are identifying all material weaknesses and whether they are identifying and evaluating control deficiencies appropriately. They said companies should carefully consider the potential magnitude of undetected errors that could have occurred. Our publication, 2014 AICPA National Conference on Current SEC and PCAOB Developments, discusses the conference in more detail. 2 Financial reporting briefs Life sciences December 2014
Accounting update FASB considers delaying revenue standard and issuing more guidance The FASB is exploring whether to propose a delay in the effective date of the new revenue recognition standard and expects to make a decision on whether to issue such a proposal by early in the second quarter of 2015. Meanwhile, the FASB and the IASB, which jointly issued the standard, are considering whether more guidance is needed on topics their Joint Transition Resource Group on Revenue Recognition (TRG) discussed this year. The Boards have asked their staffs to research whether improvements can be made to the guidance on the principal-agent assessment in arrangements involving intangible goods and services as well as on identifying performance obligations. We also expect the Boards to consider providing more guidance on licenses of intellectual property, a topic the TRG discussed at both of its meetings this year. For example, the TRG has discussed the guidance for determining whether a license is distinct, as well as when a contract is within the scope of the sales- and usage-based royalty exception and how the exception is applied. The Boards are using the TRG discussions to determine which issues require more attention. The next TRG meeting is scheduled for 26 January 2015. The SEC staff, meanwhile, is weighing what additional measures or actions it could take to help registrants implement the new standard. Industry task forces organized by the American Institute of Certified Public Accountants (AICPA) also are discussing implementation issues. The AICPA has not established a task force for the life sciences industry. We believe life sciences companies should continue to monitor the activity of the Boards and the TRG and work on implementing the new standard. As a reminder, public life sciences companies also should be making disclosures about the effects of the new standard as discussed in SEC Staff Accounting Bulletin Topic 11.M. Under US GAAP, the current effective date for public entities is fiscal years and interim periods beginning after 15 December 2016. Reminder about the annual pharma fee The Internal Revenue Service (IRS) issued final regulations on 28 July 2014 that will affect how the annual branded prescription drug fee imposed by the Affordable Care Act is recognized. As a result of this change, companies will have to adjust their annual fee liability to include fees payable for 2014 sales. A calendar year-end company that previously recorded a liability in the first quarter of 2014 for 2013 sales based on the accounting guidance should have recorded an additional liability and related expense as a cumulative catch-up adjustment in the period the final regulations were issued (i.e., the third quarter in 2014). Further, the remaining deferred cost should have been expensed in that same period. We believe a company should accrue its best estimate of the fee, including adjustments, it expects to pay based on the current year s sales, regardless of the timing of billing or adjustment. That s because while the billing of the fee is cumbersome, a company incurs the legal obligation to pay the fee, including any subsequent adjustment, in the year of sales to specified US government programs. For purposes of accounting for the fee, it s irrelevant that the IRS sends initial bills the year after sales are incurred and makes final adjustments the following year (i.e., companies received bills for 2013 sales in 2014, and the IRS will make final adjustments in 2015). New consolidation guidance is coming soon The FASB plans to issue a final standard in early 2015 that would rescind the deferral from FAS 167 guidance for certain investment companies, permanently exempt most money market funds and make other changes to today s consolidation guidance. The FASB staff has said the earliest the standard will be issued is February 2015, meaning it may be issued in time for entities to adopt it early for use in their 2014 financial statements. Entities considering early adoption will need to evaluate their internal controls over consolidation procedures and implement any necessary changes in time for their year-end reporting. Financial reporting briefs Life sciences December 2014 3
Accounting update While the new guidance will be aimed at asset managers, it could affect life sciences entities, particularly those that are involved with limited partnerships or similar entities. The guidance is expected to: (1) relax the criteria in US GAAP for determining when fees paid to a decision maker or service provider do not represent a variable interest, (2) amend the criteria for determining whether a limited partnership (or similar entity) is a variable interest entity and (3) eliminate the current presumption that a general partner controls a limited partnership in the voting model. The expected effective date for public business entities is fiscal years and interim periods beginning after 15 December 2015. New guidance on two EITF issues, including pushdown accounting The FASB issued guidance that allows all acquired entities to choose to apply pushdown accounting (i.e., reflect the acquirer s basis of accounting for the acquired entity s assets and liabilities) when an acquirer obtains control of them. At the same time, the SEC staff rescinded its guidance on pushdown accounting, meaning that SEC registrants and non-registrants will follow the new US GAAP guidance, which was effective immediately. The FASB also issued guidance that requires all entities to use what is called the whole instrument approach to determine the nature of a host contract in a hybrid financial instrument issued in the form of a share (e.g., a preferred share with a redemption feature). Under that guidance, issuers and investors must consider all of a hybrid instrument s stated and implied substantive terms and features, including any embedded derivative features being evaluated for bifurcation. Both standards are based on consensuses of the Emerging Issues Task Force (EITF). The FASB also issued an EITF proposal that would eliminate the requirement for entities that measure investments using the net asset value practical expedient to categorize them in the fair value hierarchy table. Comments are due by 15 January 2015. FASB still debating financial instruments guidance In the classification and measurement portion of this project, the FASB is still discussing whether to allow marketable equity securities to be classified as available for sale, and how to define core deposit liabilities and what type of information should be disclosed about them. On impairment, the Board continued to work on its lifetime expected credit losses model. The proposed guidance could affect life sciences entities, not just those that hold loans and debt securities. Specifically, it also would be applied to trade receivables, lease receivables recognized by lessors and certain financial guarantee contracts. We expect the Board to issue final guidance on both classification and measurement and impairment in 2015. The Board added hedging back to its active agenda and made a preliminary decision to address hedge effectiveness requirements, the potential elimination of the shortcut and critical terms match methods and simplifying hedge documentation, among other topics. Boards close to finishing redeliberations on leases The FASB and the IASB moved closer to wrapping up redeliberations on guidance that would require lessees to put most leases on their balance sheets. The Boards reaffirmed that a lease would be defined as a contract that conveys the right to use an asset for a period of time in exchange for consideration, as they proposed in 2013. As we ve said before, the FASB is pursuing a dual model for lessee accounting while the IASB is pursuing a single model with an exemption for leases of small assets that may be difficult to operationalize. Both Boards have agreed to limit changes to current lessor accounting. They aren t likely to issue new standards before the second half of 2015. Another private company accounting alternative The FASB endorsed an accounting alternative developed by the Private Company Council (PCC) that would allow private companies to simplify their accounting for intangible assets acquired in a business combination and said it would consider similar relief for public business entities and not-for-profits. Final guidance on the alternative is expected by the end of the year. Under the alternative, which is the fourth the FASB has approved under US GAAP, a private company could elect to limit the customer-related intangibles it recognizes separately to those capable of being sold or licensed independently from the other assets of the business. Recognition of noncompetition agreements will be precluded. If elected, the alternative would be applied prospectively for all business combinations entered into after the effective date, and entities that elect the alternative will be required to elect the private company accounting alternative for goodwill in Accounting Standard Update (ASU) 2014-02. 4 Financial reporting briefs Life sciences December 2014
Accounting update Full speed ahead on simplification The FASB voted to issue final guidance to simplify income statement presentation by eliminating extraordinary items in what is likely to be the first ASU it issues as part of its simplification initiative. Under the initiative, the FASB is moving quickly to improve US GAAP by addressing narrow topics. In recent months, the FASB has received comments on proposals on the presentation of debt issuance costs, the measurement date for defined benefit plan sponsors, the accounting for fees paid in a cloud computing arrangement and the subsequent measurement of inventory. In commenting on the inventory proposal, we and others expressed concerns that it would increase the cost and complexity of financial reporting for certain companies using the last-in, first-out method of accounting and wouldn't provide useful information to investors. The FASB also has launched a project to simplify the accounting for share-based payments and has decided to propose changes to the accounting for transactions in which an employee uses shares to satisfy the employer s minimum statutory income tax withholding obligation, forfeitures and income taxes when awards vest or are settled. In addition, a proposal is expected in early 2015 that would eliminate the exception for the income statement recognition of income taxes on intercompany transactions and would require all deferred tax assets and liabilities to be classified as noncurrent. The FASB also plans to discuss the balance sheet classification of debt. New actuarial tables may raise benefit plan sponsors obligations The Society of Actuaries has issued new mortality tables and a new improvement scale that reflect today s longer life expectancies. Life sciences companies that use them (or use them as a starting point) for developing their assumptions could see an increase in their benefit obligation. Companies will need to disclose any significant changes in benefit obligations and the general approach used to estimate mortality rates in management s discussion and analysis. Life sciences companies that do not use the tables should be considering longer life expectancies and should be prepared to support their assumptions with credible data. Disclosure framework and other projects on the FASB agenda The FASB is continuing to work on its widely watched disclosure framework project. The Board is trying to develop a framework for its consideration of new requirements and its evaluation of existing ones. The FASB also is trying to develop guidance that would allow companies to apply discretion in determining which disclosures they should make. Other projects on the FASB agenda include goodwill impairment for public business entities and not-forprofits, government assistance disclosures, clarifying the definition of a business and short-term improvements in accounting for liabilities and equity. Financial reporting briefs Life sciences December 2014 5
Regulatory developments Updating your system of internal control Most life sciences entities subject to internal control reporting are in the process of adopting the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). While we do not expect transitioning to the 2013 framework to require significant changes in a company s system of internal control if it was effective under the 1992 framework, a company may identify gaps in internal control and/or in its documentation that need to be addressed to evidence that the new framework s 17 principles are present and functioning. Entities may find it difficult to evaluate the effects of any deficiencies they find in information technology general controls (ITGC). These controls often have a pervasive effect on both automated controls and controls that depend on information provided by the system. Further, a company s failure to correct pervasive or recurring ITGC deficiencies may indicate a deficiency in the company s overall control environment. As a reminder, life sciences companies are required to state in their year-end filings with the SEC whether they used the 2013 framework, the original COSO framework or another framework to assess their system of internal controls. PCAOB guidance on related parties The SEC approved a new PCAOB standard and related amendments intended to increase the auditor s focus on a company s transactions with related parties, significant unusual transactions, and a company s financial relationships and transactions with its executive officers, which are associated with risks of error or fraud. Auditors will now be required to make a number of inquiries of management and others inside a company, make certain communications to the audit committee and perform certain specific procedures, including reading executives compensation agreements. Life sciences companies should revisit the controls they have in place to identify, account for and, if necessary, disclose these transactions. The standard and amendments are effective for audits of financial statements for fiscal years beginning on or after 15 December 2014, including reviews of interim financial information within those years. PCAOB evaluates changes to auditor s going concern assessment The PCAOB is evaluating potential revisions to its standard that requires auditors to assess a company s ability to continue as a going concern in light of new US GAAP guidance requiring management to make a similar assessment. The PCAOB plans to issue a staff consultation paper on the topic in the coming months. The PCAOB staff stated in a practice alert in late September that, while the FASB has issued guidance for preparers, the requirements in the PCAOB s auditing standards have not changed. As a result, auditors should apply the requirements in the PCAOB s auditing standards, the alert said. The US GAAP guidance is effective for annual periods beginning after 15 December 2016 and for interim periods thereafter (with early adoption permitted). The AICPA s Auditing Standards Board also is discussing whether to revise its auditing standard in light of the new US GAAP guidance. PCAOB projects on transparency, auditor s report and other topics The PCAOB is expected to issue a supplemental request for comment to consider the possibility of naming the audit engagement partner and other firms that participate in the audit in a new form that would be filed with the PCAOB. The PCAOB also plans to issue a new proposal in the coming months on how to make the auditor s report more meaningful by including more information than today s pass/fail model. In addition, the PCAOB staff is drafting proposals to address planning and supervision in multilocation audits and the auditor s use of specialists. The PCAOB s staff also is developing a release that will discuss the potential for the development and disclosure of audit quality indicators and plans to seek input on the usefulness of such information to investors, regulators, audit firms and other stakeholders in the coming months. 6 Financial reporting briefs Life sciences December 2014
Regulatory developments The PCAOB recently received comments on whether it should update its rules on auditing accounting estimates and fair value measurements in light of significant deficiencies the staff has found in these areas. Commenters generally supported enhancing the existing standards, and some said additional guidance on evaluating the reasonableness of estimates with significant measurement uncertainty and how to consider the use of third parties involved in the development of an estimate would be helpful. In our response to the staff consultation paper, we said we believe there is an opportunity to improve existing standards but we expressed concern that a single standard would not effectively consider the wide array of accounting estimates and fair value measurements that need to be addressed and could result in unintended consequences. Financial reporting briefs Life sciences December 2014 7
Other considerations Highly inflationary economies Based on a review of International Monetary Fund data and discussions between the SEC staff and the International Practices Task Force about the data, life sciences companies should treat the following countries as highly inflationary economies, as defined under US GAAP: Venezuela Belarus Sudan Iran Summary of open comment periods Proposal Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent) Disclosures about Investments in Other Investment Companies Comment period ends 15 January 2015 17 February 2015 Because the cumulative three-year inflation rate in Belarus is projected to drop below 100% by the end of 2014, the SEC staff has said companies should monitor the data to determine whether it is appropriate to continue treating that economy as highly inflationary. 8 Financial reporting briefs Life sciences December 2014
Effective date highlights Note: Early adoption generally is permitted unless otherwise noted. Effective in 2014 for public (1) calendar year-end entities (2) ASU 2014-17 Business Combinations (Topic 805), Pushdown Accounting Effective immediately (18 November 2014). After the effective date, an acquired entity may elect to apply the guidance to future change-in-control events or to its most recent change-in-control event. ASU 2014-06 Technical Corrections and Improvements Related to Glossary Terms Effective upon issuance (14 March 2014). ASU 2013-12 Definition of a Public Business Entity An Addition to the Master Glossary The term public business entity is being used to consider the scope of new guidance beginning in 2014. ASU 2013-11 ASU 2013-08 ASU 2013-07 ASU 2013-05 ASU 2013-04 Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists Financial Services Investment Companies (Topic 946), Amendments to the Scope, Measurement, and Disclosure Requirements Effective for fiscal years, and interim periods within those years, beginning after 15 December 2013. Effective for an entity s interim and annual reporting periods in fiscal years that begin after 15 December 2013. Earlier application is prohibited. Presentation of Financial Statements (Topic 205), Liquidation Basis of Accounting Effective for an entity that determines liquidation is imminent during annual reporting periods beginning after 15 December 2013, and interim reporting periods therein. Foreign Currency Matters (Topic 830), Parent s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date Effective after 2014 for public (1) calendar year-end entities (2) ASU 2014-16 ASU 2014-15 ASU 2014-12 ASU 2014-10 Derivatives and Hedging (Topic 815), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity Presentation of Financial Statements Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern Effective for fiscal years, and interim periods within those years, beginning after 15 December 2013. Effective for fiscal years, and interim periods within those years, beginning after 15 December 2013. Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2015. Effective for annual periods ending after 15 December 2016, and interim periods within annual periods beginning after 15 December 2016. Compensation Stock Compensation (Topic 718), Accounting for Share-Based Effective for annual periods and interim periods within those annual periods, Payments When the Terms of an Award Provide That a Performance Target Could beginning after 15 December 2015. Be Achieved after the Requisite Service Period Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation Amendments to ASC 915: Effective for annual reporting periods beginning after 15 December 2014, and interim periods therein. Amendments to ASC 810: Effective for annual reporting periods beginning after 15 December 2015, and interim periods therein. ASU 2014-09 Revenue from Contracts with Customers (Topic 606) Effective for annual reporting periods beginning after 15 December 2016, including interim reporting periods within that reporting period. ASU 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity Effective for all disposals (or classifications as held for sale) of components of an entity, and all businesses or nonprofit activities that, on acquisition, are classified as held for sale, that occur within annual periods beginning on or after 15 December 2014, and interim periods within those years. ASU 2014-05 Service Concession Arrangements (Topic 853) Effective for annual periods, and interim periods within those annual periods, beginning after 15 December 2014. ASU 2014-01 Investments Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects Effective for annual periods, and interim reporting periods within those annual periods, beginning after 15 December 2014. 1 Refer to each 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 JOBS 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. Financial reporting briefs Life sciences December 2014 9
Effective date highlights Effective in 2014 for nonpublic (3) calendar year-end entities ASU 2014-17 Business Combinations (Topic 805), Pushdown Accounting Effective immediately (18 November 2014). After the effective date, an acquired entity may elect to apply the guidance to future change-in-control events or to its most recent change-in-control event. ASU 2014-06 Technical Corrections and Improvements Related to Glossary Terms Effective upon issuance (14 March 2014). ASU 2013-12 Definition of a Public Business Entity An Addition to the Master Glossary The term public business entity is being used to consider the scope of new guidance beginning in 2014. ASU 2013-08 ASU 2013-07 ASU 2013-04 ASU 2013-02 Financial Services Investment Companies (Topic 946), Amendments to the Scope, Measurement, and Disclosure Requirements Effective for an entity s interim and annual reporting periods in fiscal years that begin after 15 December 2013. Earlier application is prohibited. Presentation of Financial Statements (Topic 205), Liquidation Basis of Accounting Effective for an entity that determines liquidation is imminent during annual reporting periods beginning after 15 December 2013, and interim reporting periods therein. Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income Effective for fiscal years ending after 15 December 2014, and interim and annual periods thereafter. Effective for fiscal years beginning after 15 December 2013, and interim and annual periods thereafter. ASU 2012-04 Technical Corrections and Improvements Effective upon issuance (1 October 2012) for amendments that do not have transition guidance. Amendments that are subject to transition guidance: effective for fiscal periods beginning after 15 December 2013. Effective after 2014 for nonpublic (3) calendar year-end entities ASU 2014-16 ASU 2014-15 ASU 2014-12 ASU 2014-10 Derivatives and Hedging (Topic 815), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity Presentation of Financial Statements Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern Effective for fiscal years beginning after 15 December 2015, and interim periods within fiscal years beginning after 15 December 2016. Effective for annual periods ending after 15 December 2016, and interim periods within annual periods beginning after 15 December 2016. Compensation Stock Compensation (Topic 718), Accounting for Share-Based Effective for annual periods and interim periods within those annual periods, Payments When the Terms of an Award Provide That a Performance Target Could beginning after 15 December 2015. Be Achieved after the Requisite Service Period Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation Amendments to ASC 915: Effective for annual reporting periods beginning after 15 December 2014, and for interim reporting periods beginning after 15 December 2015. Amendments to ASC 810: Effective for annual reporting periods beginning after 15 December 2016, and for interim reporting periods beginning after 15 December 2017. ASU 2014-09 Revenue from Contracts with Customers (Topic 606) Effective for annual reporting periods beginning after 15 December 2017, and interim reporting periods within annual reporting periods beginning after 15 December 2018. ASU 2014-08 ASU 2014-07 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity Consolidation (Topic 810), Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements Effective for all disposals (or classifications as held for sale) of components of an entity and all businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after 15 December 2014, and interim periods within annual periods beginning on or after 15 December 2015. Effective for annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015. ASU 2014-05 Service Concession Arrangements (Topic 853) Effective for annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015. ASU 2014-03 Derivatives and Hedging (Topic 815), Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps Simplified Hedge Accounting Approach Effective for annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015. ASU 2014-02 Intangibles Goodwill and Other (Topic 350), Accounting for Goodwill Effective for goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015. ASU 2014-01 ASU 2013-11 ASU 2013-05 Investments Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects Effective for annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015. Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Effective for fiscal years, and interim periods within those years, beginning after Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists 15 December 2014. Foreign Currency Matters (Topic 830), Parent s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity Effective for fiscal years beginning after 15 December 2014, and interim and annual periods thereafter. 3 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. 10 Financial reporting briefs Life sciences December 2014
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 PCC discusses expanding the use of the term public business entity and other projects (15 December 2014) FASB holds forum on financial disclosures (9 December 2014) FASB proposes disclosures about investments in other investment companies (8 December 2014) FASB makes pushdown accounting optional (19 November 2014) A whole-istic approach to defining host contracts in hybrid instruments issued as shares (4 November 2014) Joint Transition Resource Group tackles new revenue topics (3 November 2014) FASB proposes eliminating certain investments from the fair value hierarchy (31 October 2014) Benefit plan sponsors may need to consider new mortality tables in making year-end assumptions (30 October 2014) Boards reaffirm the definition of a lease but continue to work on its application (24 October 2014) Spotlight on transactions with related parties, significant unusual transactions and executives (22 October 2014) FASB issues simplification proposals on debt issuance costs and retirement benefits (16 October 2014) Final IRS regulations affect how annual pharma fee is recognized (13 October 2014) Michigan enacts legislation that could affect income apportionment (13 October 2014) FASB launches project to simplify share-based payment accounting (9 October 2014) PCC wraps up intangible assets and discusses share-based payments (18 September 2014) Technical Line Year-end financial reporting reminders (11 December 2014) Companies may be subject to excise taxes under Affordable Care Act (5 December 2014) New consolidation guidance is coming soon (14 November 2014) Financial reporting developments Derivatives and hedging (4 December 2014) Lease accounting (26 November 2014) Discontinued operations (12 November 2014) Discontinued operations (following the adoption of ASU 2014-08) (12 November 2014) Impairment or disposal of long-lived assets (12 November 2014) Bankruptcies, liquidations and quasi-reorganizations (22 October 2014) Accounting for income taxes (18 September 2014) Equity method investments (18 September 2014) Business combinations (16 September 2014) Consolidation and the Variable Interest Model: Determination of a controlling financial interest (15 September 2014) Comment letters FASB proposal to simplify the presentation of debt issuance costs (15 December 2014) FASB proposal to simplify the measurement date of an employer s defined benefit obligation and plan assets (9 December 2014) FASB Technical corrections and improvements (26 November 2014) PCAOB staff consultation paper: auditing accounting estimates and fair value measurements (3 November 2014) FASB proposal to eliminate the concept of extraordinary items (30 September 2014) FASB proposal to simplify the measurement of inventory (30 September 2014) Other 2014 AICPA National Conference on Current SEC and PCAOB Developments (15 December 2014) 2014 SEC annual reports Form 10-K (4 December 2014) 2015 proxy statements An overview of the requirements (4 December 2014) 2015 SEC quarterly reports Form 10-Q (4 December 2014) Disclosure effectiveness: What investors, company executives and other stakeholders are saying November 2014 Disclosure effectiveness: What companies can do now October 2014 SEC in Focus (9 October 2014) EU audit legislation: understanding the legislation and how it will affect you October 2014 Third quarter 2014 Standard Setter Update Financial reporting and accounting developments October 2014 SEC Comments and Trends September 2014 EITF Update September 2014 Board Matters Quarterly Critical insights for today s audit committee September 2014 On-demand webcasts EY Q4 2014 financial reporting update The new revenue recognition standard a closer look SEC comments and trends: current reporting issues Accounting for income taxes: a quarterly perspective EY Assurance Tax Transactions Advisory 2014 Ernst & Young LLP. All Rights Reserved. SCORE No. BB2902 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. Financial reporting briefs Life sciences December 2014 11