{FASB Current Updates} Central Ohio HFMA : Spring Conference
March 21, 2014
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN Agenda
New Accounting Standards Pending Accounting Standards 2
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN New
Accounting Standards 3
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Effective Standards FASB Updates discussed previously : Cash Flow
Classification of Proceeds from Donated Securities (ASU 2012-05)
Effective for years beginning after June 15, 2013, with early
adoption permitted Joint and Several Liability (ASU 2013-04)
Effective for annual periods ending after December 15, 2014 with
early adoption permitted Testing of Indefinite-Lived Intangible
Assets for Impairment (ASU 2012-02) Effective for annual periods
beginning after September 15, 2012 with early adoption permitted
Donated Personnel Services Received from Affiliates (ASU 2013-06)
Effective for periods beginning after June 15, 2014, with early
adoption permitted 4
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Definition of Public Business Entity The FASB Accounting Standards
Codification currently includes several definitions of public
entity and nonpublic entity FASB conclude to develop a new
definition of a public business entity to determine which entities
are within the scope of the Private Company Decision Making
Framework Able to adopt the private company alternatives introduced
by the Private Company Council (PCC) ASU 2013-02 was issued in
December 2013 to provide a single definition of a public business
entity for use in future accounting and reporting standards No
changes made to existing definitions in the Codification
Not-for-profit entities(NFP) and employee benefit plans (EBP) are
specifically excluded FASB will consider whether NFP and EBPs will
be able to adopt accounting alternatives and standards intended for
nonpublic business entities on a standard-by-standard basis 5
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Definition of Public Business Entity A public business entity is a
business entity meeting any one of the criteria below. Neither a
not-for-profit entity or an employee benefit plan is a business
entity. Entity is required by the SEC to file or furnish financial
statements or does file or furnish financial statements, with the
SEC Entity is required by the Securities Exchange Act of 1934, as
amended, or rules or regulations promulgated under the Act, to file
or furnish financial statements with a regulatory agency Entity is
required to file or furnish financial statements with a regulatory
agency in preparation for sale of securities or for purposes of
issuing securities Entity has(or is a conduit bond obligor for)
unrestricted securities that are traded or can be traded on an
exchange or over-the-counter market Its securities are
unrestricted, and it is required to provide GAAP financial
statements to be made publicly available on a periodic basis
pursuant to a legal or regulatory requirement 6
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Private Company Council (PCC) Formed by the Financial Accounting
Foundation in 2012 to assist the FASB in improving the process of
setting standards for private companies The PCC and FASB work
jointly to determine whether and when alternatives within US GAAP
should be made available for private companies Since its formation,
the PCC has worked with the FASB on the following projects: Private
Company Decision-Making Framework- outlines criteria to determine
whether and in what circumstances it is appropriate to adjust
financial reporting requirements for private companies that follows
US GAAP. Definition of a Public Business Entity Alternatives to
Existing US GAAP 7
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN PCC
Accounting for Goodwill ASC 2014-02 provides private companies with
an accounting alternative to simplify the goodwill accounting model
Applicable for all entities except for public business entities and
not-for-profit entities Effective for years beginning after
December 15, 2014 with early adoption permitted If the goodwill
alternative is adopted, a private company must apply all the
provisions of ASU 2014-02 prospectively to all of its existing and
future goodwill. 8
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN PCC
Accounting for Goodwill Key provisions of ASU 2014-02: Requires
goodwill to be amortized on a straight-line basis over a period of
10 years or less, in certain circumstances Make an accounting
policy election to test for impairment at either the entity or
reporting unit Single step test for impairment, which compares the
fair value of the entity or reporting unit to its carrying amount
Test goodwill for impairment only when there is a triggering event
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN PCC
Accounting for Certain Interest Rate Swaps FASB issued ASU 2014-03
to provide private companies an alternative to apply hedge
accounting to certain receive-variable, pay- fixed interest rate
swaps Applicable for private companies that are not financial
institutions, excludes public business entities and not-for-profit
entities Effective for years beginning after December 15, 2014 with
early adoption permitted New and existing swaps Election made on a
swap by swap basis Allows for a simplified hedge accounting
approach if certain criteria are met. Allows for the measurement at
settlement value instead of fair value. 10
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Pending Accounting Standards 11
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Accounting for Goodwill In February 2014, the Board considered
several alternatives for accounting for goodwill after a business
combination for public business entities and not-for-profit
entities: Amortization of goodwill over 10 year or less with
testing for impairment only after a triggering event Amortization
of goodwill with impairment tests over its useful life not to
exceed a maximum number of years The direct writeoff of goodwill
Simplified impairment test No expected completion date 12
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Revenue Recognition FASB/IASB Joint Project In October 2013, the
boards completed their last round of re-deliberations on the
remaining key issues and have instructed their staffs to draft a
final standard Would replace all existing US GAAP revenue
recognition literature for exchanged transactions, including all
industry-specific guidance Revenue proposal will reverse ASU
2011-07 as cannot have bad debt as a contra revenue 13
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Revenue Recognition Summary of the proposed model 14 Identify the
contract with the customer Identify the separate performance
obligations in the contract Determine the transaction price
Allocate the transaction price to the separate performance
obligations Recognize revenue when a performance obligation is
satisfied
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Revenue Recognition Impact of New Revenue Recognition Standards on
Health Care Entities Revenue recognition for indigent and self-pay
patients The exposure draft was not clear whether or how health
care entities should recognize revenue associated with indigent and
self-pay patients Recently, the boards tentatively decided to
include a collectability threshold for recognition Contracts with
Medicare/Medicaid Can use either most likely amount or expected
value in estimating variable consideration, whichever is best
predictor 15
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Revenue Recognition Impact of New Revenue Recognition Standards on
Health Care Entities Revenue transactions involving multiple
contractual relationships As many as four different parties may be
associated with revenue transactions involving a hospital Under the
proposal, the customer is the patient Third-party payor makes
payments on the patients behalf; it is not a separate contract with
customer Scope of prepaid health service contracts Currently, these
contracts are within the scope of ASC 954-Health Care Entities
Uncertainty exists with respect to whether these contracts are
within the scope of the new exposure draft related to insurance
contracts 16
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Revenue Recognition Timeline Final standard scheduled to be issued
in the first half of 2014 It will be effective for annual reporting
periods beginning on or after December 15, 2016 for public entities
with one year deferral for non-public entities 17 So if effective
date isYears affected would be Calendar 20172016 & 2017 Fiscal
year 2018FY 2017 & FY 2018
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN Leases
Revised exposure draft was issued in May 2013 with comment period
ending in September 2013 Boards were set to issue a final standard
in the 1 st quarter of 2014; however, feedback from public
continued to challenge the benefits provided to users of the
financial statements At their January 23, 2014 meeting, the Boards
began their red liberations of the proposals included in the May
2013 exposure draft Lessor accounting model Accounting for Type A
leases by the lessors Lessee accounting model Lessee small-ticket
leases No established timeframe on a final standard 18
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Financial Statements of Not-for-Profit Entities Since 2011, the
FASB has been working with the Not-for-Profit Advisory Committee
(NAC) to improve financial reporting of Not-for-Profit entities
Objective of this project is to reexamine existing standards for
financial statement presentation by not-for-profit entities,
focusing on improving: Net asset classification requirements
Information provided in financial statements and notes about
liquidity, financial performance, and cash flows Exposure draft
expected in second half of 2014 19
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Financial Statements of Not-for-Profit Entities Decisions reached
Definition of an intermediate operating measure Changes to the
terminology and definitions of net asset classes Require a direct
method of reporting cash flows provided(used) by operating
activities Revise the cash flow categories to better align with the
intermediate measure of operations Require not-for-profits to
report expenses by their nature and retaining the requirement to
report expenses by function 20
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Reporting Discontinued Operations Amendments change the criteria
for reporting discontinued operations and enhance convergence of
the FASB and IASBs reporting requirements for discontinued
operations Stakeholders believe too many disposals of assets
qualify for discontinued operations presentation Financial
statements are not decision useful for users Higher costs for
preparers Comment period of exposure draft closed on August 30,
2013 21
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EDIT IN MASTER: CLIENT OR PRESENTATION NAME PLANTE MORAN
Reporting Discontinued Operations Definition of discontinued
operation would be changed: Only those components of an entity that
represent a separate major line of business or major geographic
area of operations would be eligible for discontinued operations
presented in the financial statement Additional disclosures about
discontinued operations would be required: 22