Financial reporting briefs What you need to know about this quarter’s accounting, financial reporting and other developments

June 2018

In this issue:

Top story ..................................... 2 Accounting update ....................... 3 Regulatory developments ............. 5 Effective date highlights ................ 6 Reference library ......................... 9

2 | Financial reporting briefs June 2018

Top story Focus on implementing the new leases standard The effective date of the new leases standard is quickly approaching for calendar-year public business entities (PBEs) and certain other entities. Those that have made significant progress in implementing the standard are finding the process to be a more significant undertaking than they expected. It is critical for entities that are behind in implementation to increase their implementation efforts in the near term so they can address any implementation challenges before the adoption date. Calendar-year PBEs should have completed the diagnostic phase and be wrapping up the design phase. They should be planning the implementation phase, which involves implementing changes to systems, processes and controls and calculating transition adjustments.

When adopting the standard, most lessees will recognize material amounts of right-of-use assets and lease liabilities for operating leases on their balance sheets. Identifying a complete population of lease contracts and gathering the information needed to implement the standard can be challenging. These challenges could be magnified for entities that have a significant number of leases because they may need to implement new or modified information technology (IT) systems to maintain lease contract data and/or support the new accounting and disclosure requirements.

While many vendors are designing systems that they say will enable entities to comply with Accounting Standards Codification (ASC) 842, Leases, these systems may not yet be available. Entities may need to perform manual calculations (e.g., using an Excel spreadsheet to perform complex calculations), which may indicate a higher risk of error. Management will have to identify controls to address the manual calculations, including the risks related to information produced by the entity.

Also, entities will need to make significant judgments and estimates in many aspects of the new standard (e.g., determine the lease term, determine the discount rate). Entities should create processes and procedures to gather the information necessary to comply with the new disclosure requirements beginning in the quarter of adoption. Entities will also need to have controls in place to identify events that may be a lease modification or may require a remeasurement of the lease liability.

Most entities are expected to elect the package of transition practical expedients provided in the standard, which would likely reduce the effort required to implement the standard. Regardless of whether the entity elects the package of transition practical expedients, it is required to apply different accounting models for leases that exist before the effective date and those that commence or are modified on or after the effective date (1 January 2019 for calendar-year PBEs). As a result, many entities will need two sets of policies, processes and controls to implement the standard.

Entities should also monitor standard-setting and regulatory developments. The FASB decided to move ahead with its proposal to provide a transition option and an optional practical expedient that would allow lessors to elect, by class of underlying asset, to not separate lease and related non-lease components, when (1) the timing and pattern of transfer of the lease component and the non-lease component(s) associated with it are the same and (2) the lease component would be classified as an operating lease, if it were accounted for separately. Lessors would account for a combined component that meets these two criteria under ASC 606, Revenue from Contracts with Customers, if the non-lease component is the predominant component. Otherwise, lessors would be required to account for the combined component as an operating lease in accordance with ASC 842. In addition, the Board decided to address a lessor’s accounting for sales taxes and certain lessor costs paid by the lessee in future standard setting.

Welcome to the June 2018 Financial reporting briefs. This edition highlights the latest developments in financial reporting and alerts you to some important considerations for 2018.

Interested in learning about the challenges of implementing the new leases standard? We’ve got it covered in our Top story. Our Accounting update section highlights what private companies should be doing now to implement the new revenue standard and the FASB’s proposal on collaborative arrangements.

In our Regulatory developments section, we provide updates on other SEC and PCAOB developments.

Need more information? Check out our Reference library, where we list our recent publications on the topics discussed here and provide links to them.

3 | Financial reporting briefs June 2018

Accounting update Private companies need to ramp up for revenue standard Private companies need to increase their efforts focused on implementing the new revenue standard. An important step is forming a cross-functional project team to identify and design the changes the company will need to make to its accounting, reporting and tax processes, its IT systems, its training for employees and its communications with stakeholders. In addition to accounting and finance personnel, the team will likely need to include people in sales, the legal department and human resources.

If they haven’t already done so, calendar-year private companies should be working on a diagnostic assessment. This phase involves developing a project plan, assessing contract terms and scoping various revenue streams to develop preliminary accounting policies. Next comes the solution development phase, which involves gathering the data needed to meet the standard’s expanded disclosure requirements and developing changes to systems and processes. We generally expect both the diagnostic assessment and the solution development to be completed by the end of this calendar year. During the implementation phase, companies will roll out these changes across their organizations. As a reminder, the standard is effective for private companies for annual periods beginning after 15 December 2018.

Based on our experiences with PBEs, we’ve identified accounting challenges that private companies may also encounter. For instance, some PBEs found it challenging to identify performance obligations. The focus is on determining which promises are distinct (and therefore separate units of accounting). Significant judgment will be needed to determine whether goods or services should be combined into a single performance obligation. Another challenging area is the evaluation of whether a company is acting as a principal or an agent. While the concept has been around for a long time, the new standard requires entities to change their mindset and focus on determining whether the company controls a specified good or service before transferring that good or service to the customer. Like PBEs, private companies also will be adopting new cost guidance in ASC 340-40 and new guidance on transfers of nonfinancial assets (or in substance nonfinancial assets) in ASC 610-20.

FASB staff clarifies new hedging guidance The FASB continues to discuss implementation issues associated with the new hedge accounting guidance. At a recent Board meeting, the FASB staff provided its views on questions about partial-term fair value hedges and hedging components of nonfinancial risks. In addition, the Board added a narrow-scope project to its agenda to address the allocation of basis adjustments under the last-of-layer method and whether a multiple layer hedging strategy is permitted under this method. The Board also directed the staff to research potential technical improvements to clarify the Board’s intent regarding the application of the new guidance that an entity is not required to automatically dedesignate a cash flow hedging relationship when the hedged risk changes. Companies that will apply these aspects of the new guidance should monitor developments. As a reminder, the guidance is effective for PBEs for fiscal years beginning after 15 December 2018, including interim periods therein, but early adoption is permitted.

FASB proposes clarifying guidance on collaborative arrangements The FASB proposed clarifying that certain transactions between participants in a collaborative arrangement should be accounted for as revenue under ASC 606 when the participant is a customer for a distinct good or service. When the counterparty is not a customer, the proposal would preclude a transaction from being presented as revenue if it does not directly relate to third-party sales. Collaborative arrangements are common in the life sciences and entertainment industries.

Accounting update

4 | Financial reporting briefs June 2018

FASB decides against using a new definition of materiality In its disclosure framework projects, the FASB voted to finalize amendments to Chapters 3 and 8 of its Statement of Financial Accounting Concepts 8, Conceptual Framework for Financial Reporting, related to the Board’s decision process and the entity’s decision process, but decided not to include the new definition of materiality it had proposed. Instead, the FASB decided to define materiality in Chapter 3 using language similar to what is already in Concepts Statement 2, Qualitative Characteristics of Accounting Information. The FASB also decided not to move forward with its proposed amendments to ASC 235, which would have referred to the new definition of materiality. The Board is still redeliberating some of its proposals on disclosures involving topic-level disclosure reviews (such as inventory and income taxes) and has indicated that it will likely finalize all aspects of the disclosure framework project by the end of this year.

Harold Monk steps down from FASB FASB member Harold Monk resigned from the Board for personal reasons, effective 31 May 2018. The FASB will operate with six members while the Financial Accounting Foundation searches for a successor.

EITF reaches one final consensus and one consensus-for-exposure The Emerging Issues Task Force (EITF or Task Force) reached a final consensus that entities should use the guidance in ASC 350-40 to determine which implementation costs of a cloud computing arrangement that is considered to be a service contract to defer and recognize as an asset. The Task Force also reached a consensus-for-exposure that the acquiring entity in a business combination accounted for under ASC 805 would use the definition of a performance obligation in ASC 606 to determine whether an assumed liability should be recognized in a contract with a customer. Both the final consensus and the consensus-for-exposure are subject to ratification by the FASB.

5 | Financial reporting briefs June 2018

Regulatory developments Get ready for reporting on critical audit matters Companies need to take steps to prepare for the most significant change in auditor reporting in decades. The Public Company Accounting Oversight Board (PCAOB) requirement that auditors describe critical audit matters (CAMs) in their auditor’s report goes into effect for audits of large accelerated filers in 2019, and companies will need to consider whether to change their own disclosures and communications with investors and other stakeholders in response.

We have been in discussions with management and audit committees about potential CAMs, which are defined as items communicated or required to be communicated to the audit committee that relate to accounts or disclosures that are material to the financial statements and involved especially challenging, subjective or complex auditor judgment. Management should consider involving personnel from more departments (e.g., legal) in discussions about disclosures and communications the company will make in response to CAMs. Audit committee members also need to understand any changes the company makes to its processes and disclosures.

Roisman nominated to succeed Piwowar as SEC Commisioner President Donald Trump nominated Elad Roisman to serve as an SEC Commissioner, succeeding Michael Piwowar, who plans to depart the SEC by 7 July 2018. Mr. Roisman, a Republican, is Chief Counsel to the Senate Committee on Banking, Housing and Urban Affairs. He also served as counsel to former SEC Commissioner Daniel Gallagher, focusing on trading and markets issues. Mr. Roisman’s nomination requires confirmation by the Senate.

Reminders on disclosures of incomplete accounting for tax reform Entities that have not yet completed their accounting for the income tax effects of the enactment of the Tax Cuts and Jobs Act (the Act) need to make the appropriate disclosures in accordance with SEC Staff Accounting Bulletin (SAB) 118.

Entities need to make these disclosures at the interim financial statement reporting date, and the disclosures need to be sufficiently detailed for a reader to understand the status of a company’s accounting for the effects of the Act (i.e., the effects for which the accounting is complete, the effects for which the accounting is incomplete but a reasonable estimate can be made and the effects for which the accounting is incomplete and no provisional amounts have been recorded) and the additional information needed to complete the accounting under ASC 740.

In accordance with 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 also should consider the effect of the guidance in Accounting Standards Update (ASU) 2018-02, on reclassifying certain tax effects of the Act from accumulated other comprehensive income.

Reminder on Regulation S-X waiver requests SEC officials are encouraging companies to use Rule 3-13 of Regulation S-X to request relief from burdensome financial statement requirements that result in the disclosure of information that exceeds what is material to investors. SEC Chairman Jay Clayton has said the SEC staff is placing a high priority on responding to requests for relief in a timely manner. This comes at a time when the SEC is considering broader changes to its disclosure requirements, internal processes and staff guidance as a way to make the public markets more attractive.

6 | Financial reporting briefs June 2018

Effective date highlights Note: Early adoption generally is permitted unless otherwise noted.

Effective in 2018 for public1 calendar year-end entities2 ASU 2018-06 Codification Improvements to Topic 942, Financial Services — Depository

and Lending Effective upon issuance (7 May 2018).

ASU 2018-05 Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update)3

See SAB 118.

ASU 2018-04 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

Amendments to ASC 320: Effective upon adoption of the amendments in ASU 2016-01. Amendments to ASC 980: See SEC Release No. 33-9273.

ASU 2018-03 Technical Corrections and Improvements to Financial Instruments — Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities

Effective for fiscal years beginning after 15 December 2017, and interim periods within those fiscal years beginning after 15 June 2018.

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

Effective upon adoption of the amendments in ASU 2014-09.

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

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.

ASU 2017-10 Service Concession Arrangements (Topic 853), Determining the Customer of the Operation Services

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.

ASU 2017-09 Compensation — Stock Compensation (Topic 718), Scope of Modification Accounting

Effective for annual periods, including interim periods within those annual periods, beginning after 15 December 2017.

ASU 2017-07 Compensation — Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Effective for annual periods beginning after 15 December 2017, including interim periods within those annual periods.

ASU 2017-05 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

Effective upon adoption of the amendments in ASU 2014-09.

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

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-18 Statement of Cash Flows (Topic 230), Restricted Cash Effective for fiscal years beginning after 15 December 2017, and interim periods within those fiscal years.

ASU 2016-16 Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory

Effective for annual reporting periods beginning after 15 December 2017, including interim reporting periods within those annual reporting periods.

ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments

Effective for fiscal years beginning after 15 December 2017, and interim periods within those fiscal years.

ASU 2016-14 Not-for-Profit Entities (Topic 958), Presentation of Financial Statements of Not-for-Profit Entities

Effective for fiscal years beginning after 15 December 2017, and interim periods within fiscal years beginning after 15 December 2018.

ASU 2016-12 Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients

Effective upon adoption of the amendments in ASU 2014-09.

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

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.

ASU 2016-10 Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-08 Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-04 Liabilities — Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products

Effective for fiscal years beginning after 15 December 2017, and interim periods within those fiscal years.

ASU 2016-01 Financial Instruments — Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities

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.

Effective date highlights

7 | Financial reporting briefs June 2018

Effective after 2018 for public1 calendar year-end entities2 ASC 2018-02 Income Statement — Reporting Comprehensive Income (Topic 220),

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018.

ASU 2018-01 Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842

Effective upon adoption of the amendments in ASU 2016-02.

ASU 2017-15 Codification Improvements to Topic 995, U.S. Steamship Entities, Elimination of Topic 995

Effective for fiscal years and first interim periods beginning after 15 December 2018.

ASU 2017-12 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities

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 (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

Amendments in Part I: Effective for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years. Amendments in Part II: Transition is not required.

ASU 2017-08 Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities

Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018.

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

Effective for fiscal years beginning after 15 December 2018.

ASU 2017-04 Intangibles — Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment

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.

ASU 2016-13 Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments

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.

ASU 2016-02 Leases (Topic 842) Effective for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years.

Effective in 2018 for nonpublic5 calendar year-end entities ASU 2018-06 Codification Improvements to Topic 942, Financial Services — Depository

and Lending Effective upon issuance (7 May 2018).

ASU 2017-09 Compensation — Stock Compensation (Topic 718), Scope of Modification Accounting

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 Not-for-Profit Entities (Topic 958), Presentation of Financial Statements of Not-for-Profit Entities

Effective for fiscal years beginning after 15 December 2017, and interim periods within fiscal years beginning after 15 December 2018.

ASU 2016-09 Compensation — Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting

Effective for fiscal years beginning after 15 December 2017, and interim periods within fiscal years beginning after 15 December 2018.

ASU 2016-06 Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments

Effective for fiscal years beginning after 15 December 2017, and interim periods within fiscal years beginning after 15 December 2018.

ASU 2016-05 Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships

Effective for fiscal years beginning after 15 December 2017, and interim 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.

Effective date highlights

8 | Financial reporting briefs June 2018

Effective after 2018 for nonpublic5 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

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.

ASC 2018-02 Income Statement — Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

Effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018.

ASU 2018-01 Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842

Effective upon adoption of the amendments in ASU 2016-02.

ASU 2017-15 Codification Improvements to Topic 995, U.S. Steamship Entities, Elimination of Topic 995

Effective for fiscal years and first interim periods beginning after 15 December 2018.

ASU 2017-12 Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities

Effective for fiscal years beginning after 15 December 2019, and interim periods beginning after 15 December 2020.

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

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.

ASU 2017-10 Service Concession Arrangements (Topic 853), Determining the Customer of the Operation Services

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.

ASU 2017-08 Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities

Effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020.

ASU 2017-07 Compensation — Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Effective for annual periods beginning after 15 December 2018, and interim periods within annual periods beginning after 15 December 2019.

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

Effective for fiscal years beginning after 15 December 2018.

ASU 2017-05 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

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2017-04 Intangibles — Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment

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

Effective upon adoption of the amendments in ASU 2014-09.

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 Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory

Effective for annual reporting periods beginning after 15 December 2018, and interim reporting periods within annual reporting periods beginning after 15 December 2019.

ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments

Effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019.

ASU 2016-13 Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments

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.

ASU 2016-12 Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-10 Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-08 Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

Effective upon adoption of the amendments in ASU 2014-09.

ASU 2016-04 Liabilities — Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products

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 June 2018

Reference library To the Point • FASB to issue final guidance on long-duration contracts for

insurers (7 June 2018)

• FASB proposes clarifying guidance on collaborative arrangements (1 May 2018)

• Companies should consider seeking relief from SEC disclosure requirements under Rule 3-13 (4 April 2018)

Technical Line • A closer look at the FASB’s new hedge accounting standard

(26 April 2018)

Financial reporting developments • Software: Revenue recognition (31 May 2018)

• Bankruptcies, liquidations and quasi-reorganizations (9 May 2018)

• Foreign currency matters (3 May 2018)

• Segment reporting (26 April 2018)

• Exit or disposal cost obligations (11 April 2018)

• Revenue recognition: Multiple element arrangements (21 March 2018)

Comment letters • FASB proposal to clarify the guidance on collaborative

arrangements (11 June 2018)

• ASB proposed auditor reporting standard (15 May 2018)

• ASB porposed omnibus statement on auditing standards to minimize certain differences with PCAOB standards (15 May 2018)

• ASB proposed standard on the auditor's responsibilities relating to other information included in annual reports (15 May 2018)

• FASB proposal to add new benchmark interest rate for hedge accounting (30 March 2018)

Other • EITF Update (June 2018)

• First Quarter 2018 Standard Setter Update (19 April 2018)

• SEC in Focus (April 2018)

• Board Matters Quarterly (April 2018)

• NAIC Bulletin — Spring 2018 edition (12 April 2018)

• Quarterly tax developments (March 2018)

• Accounting pronouncements effective for the first quarter of 2018 (22 March 2018)

On-demand webcasts • EY Q2 2018 financial reporting update

• Employment tax compliance across the states in 2018

Upcoming webcasts • The board’s role in navigating geopolitics

• Credit impairment standard: implementation updates

Click on any of the EY publications below, all of which are available free of charge on AccountingLink at www.ey.com/us/accountinglink.

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