Quarterly Accounting Update: Q3 - 2017

What’s Inside?

Selected highlights...........FASB update.....................Revenue recognition........Regulatory update..........Other developments......On the horizon...............Appendices....................

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360° INSIGHTS

Welcome to the Third Quarter issue of our Quarterly Accounting Update. Each quarter, we will provide you with up-to-date information for consideration in your financial reporting and disclosures. Our goal is for you to have current, relevant information available prior to finalizing your financial reporting deliverables. This update is organized as follows:

Selected Highlights

This section includes an executive summary of selected items and hot topics covered in this update.

FASB Update

This section includes an overview of selected Accounting Standards Updates (ASUs) issued during the period.

Rev Rec Implementation

This section includes special guidance on preparing for implementation of the new revenue recognition standard.

Regulatory Update

This section includes an overview of selected updates, releases, rules and actions during the period that might impact financial information, operations and/or governance.

Other Developments

This section includes an overview of other developments, actions, and projects of the FASB, PCC, EITF and/or other rulemaking organizations.

On the Horizon

This section includes an overview of selected projects and exposure drafts of the FASB.

Appendices

• A – Important Implementation Dates • B – Illustrative Disclosures for Recently Issued Accounting Pronouncements

Quarterly Accounting Update: Selected Highlights

FASB Makes Targeted Improvements to Hedge Accounting

In August the FASB amended the hedge accounting recognition and presentation requirements to (1) improve the transparency and understandability of information and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.

Find out more about this new standard in the FASB Update section.

Rev Rec—Are You Ready?

The new revenue recognition standard is historic in its breadth and impact across industries. It is urgent that management start assessing the impact of the new revenue recognition standard and forging a successful path to its implementation.

Find out more in the Rev Rec Implementation section.

SEC Plans to Take Action on Expanded Auditor’s Reporting Requirements

The SEC will consider approving by October 26, 2017, a controversial PCAOB rule to expand the auditor’s report in regulatory filings. Reports prepared by public company auditors will contain more information for investors and other financial statement users as a result of new rules approved in June by the PCAOB.

Read more about these issues in the Regulatory Update section.

GASB Guidance Establishes Single Approach for Reporting Leases

In June the GASB issued a new standard with guidance that establishes a single approach to accounting for and reporting leases by state and local governments.

More information on this standard can be found in the Other Developments section.

Quarterly Accounting Update: FASB Update

The following selected Accounting Standards Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB) during the third quarter. A complete list of all ASUs issued or effective in 2017 is included in Appendix A.

FASB Makes Targeted Improvements to Hedge Accounting

Affects: Entities that elect to apply hedge accounting

On August 28, 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in Accounting Standards Codification (ASC) 815, Derivatives and Hedging. The FASB’s objectives in issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. Specifically, the guidance is designed to:

• Create better alignment of hedge accounting with risk management activities • Eliminate the separate measurement and recording of hedge ineffectiveness • Provide improvements to presentation and disclosure • Simplify effectiveness assessments • Provide some relief to private companies by aligning the timing of effectiveness testing with

the timing of the issuance of financial statements

Effective Dates

Effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein. Effective for all other entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. All entities are permitted to early adopt the new guidance in any interim or annual period after issuance of the ASU.

FASB Addresses Financial Instruments with Down Round Features

Affects: Entities that issue financial instruments that include down round features

On July 13, 2017, the FASB issued ASU 2017-11, 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, which is intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, for Part I., the FASB determined that a down round feature would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative

liability at fair value with changes in fair value recognized in current earnings. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings). For Part II., before ASU 2017-11, the transition guidance in ASC 480-10 indefinitely deferred the application of some of that subtopic's requirements for certain instruments and entities. Accordingly, such instruments may qualify as equity under U.S. GAAP even though ASC 480-10-25 suggested (before ASU 2017-11) that they should be classified as liabilities. The ASU replaces the indefinite deferral in ASC 480-10 with scope exceptions that have the same applicability. The FASB's objective was to improve the navigability of the Codification without changing its application. Since the ASU is not intended to change how U.S. GAAP is applied to items within its scope, no transition guidance has been provided.

Effective Dates

Effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Effective for all other entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

Quarterly Accounting Update: Rev Rec Implementation

In 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The guidance in ASU 2014-09 is codified primarily in ASC 606, with the same title. The new revenue recognition standard affects all entities—public, private, and not-for-profit—that have contracts with customers. It is broad reaching across an organization and impacts many functional areas: accounting, tax, financial reporting, financial planning and analysis, investor relations, treasury (e.g., debt covenants), sales, legal, information technology, and human resources (e.g., employee compensation plans). It involves significant judgments and estimates, thoughtful revision of accounting policies, and new required disclosures. Implementation is a significant effort. If companies have not begun the process already, it is imperative to start preparing immediately. For many companies, the new standard will require evaluation of 2018 financial information under the new guidance.

The scope of the new standard applies to revenue arising from contracts with customers, except for the following: lease contracts, insurance contracts, contractual rights and obligations within the scope of other guidance, and non-monetary exchanges between entities in the same line of business to facilitate sales to customers; in other words, 99 percent of all revenue transactions. As a result, there are potentially significant changes ahead for certain industries, and some level of change for almost all entities.

The 5-Step Model

The core principle of the new guidance is that a company should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration that the company receives or expects to receive. To apply that principle, the seller will need to:

1. Identify the contract with a customer. 2. Identify the separate performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the separate performance obligations. 5. Recognize revenue as each performance obligation is satisfied.

Identify the

contract with a

customer

Identify the performance obligations in the contract

Determine the

transaction price

Allocate the transaction price

to the performance

obligations in the contract

Recognize revenue when

(or as) a performance obligation is

satisfied

The first step is to identify the contract with a customer. In order to meet the definition of a contract, it must meet the following requirements: the parties have approved the contract and are committed to satisfying their respective obligations; the seller can identify each party’s rights regarding goods and services; the seller can identify the payment terms for the goods or services; the contract has commercial substance; and it is probable that the seller will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

The second step is to identify the separate performance obligations in the contract. A performance obligation is a promise (whether explicit, implicit, or implied by the seller’s customary business practice) in a contract with a customer to transfer a good or service to the customer. Identifying the separate performance obligations in a contract is essential to applying the revenue recognition model. Separate performance obligations are the units of account to which the transaction price is allocated, and satisfaction of those separate performance obligations determines the timing of revenue recognition.

The third step is to determine the transaction price. The transaction price is the amount of consideration that the seller expects to be entitled to in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of a third party (for example, sales taxes). Determining the transaction price can be straightforward in many arrangements, but might be more complex if the arrangement involves variable consideration or a significant financing component (which require adjustment for the time value of money).

The fourth step is to allocate the transaction price to the performance obligations based on relative standalone selling prices. The best estimate for standalone selling price is an observable price. If an observable price is not available, management will need to estimate the selling price. This concept is very similar to the current guidance on multiple element arrangements.

The fifth and final step is to recognize revenue when a performance obligation is satisfied. If the obligation is satisfied over time, revenue is recognized using the method that best depicts the transfer of goods and services to the customer. If the obligation is satisfied at a point in time, revenue is recognized when control transfers to the customer. This is basically consistent with current guidance, although there are some circumstances when the timing of transfer of control might be different.

Contract

Performance Obligations

Transaction Price

Allocate

Recognize

Challenges Ahead

There are a number of potential challenges to understanding and implementing the new standard; it could significantly alter how many companies recognize revenue, especially those that currently apply industry-specific guidance. The new standard will also result in a significant increase in the volume of disclosures related to revenue. All companies will likely have to consider changes to information technology (IT) systems, processes, and internal controls as a result of the increased disclosure requirements, among other aspects of the model.

Key financial measures and ratios may be impacted, which in turn, will impact earnouts, bonuses, and compliance with loan covenants and other contractual requirements. IT systems may need to be changed to capture additional data (e.g., data used to make revenue transaction estimates and to support disclosures). Sales and contracting processes may need to be reassessed. Accounting processes and internal controls will need to be revised for the new model, which includes increased judgment and use of estimates. There also may be a need to maintain parallel records during transition.

Summarized below are some of the areas that could create the most significant challenges for companies as they transition to the new model.

Identifying Performance Obligations

The requirement to account for each performance obligation in a contract separately is a change for most companies. For example, companies in the construction industry historically have recognized revenue at the contract level. Performance obligations will be accounted for separately if they (1) relate to goods or services that are capable of being distinct from other goods or services promised in the contract; and (2) the goods or services are distinct within the context of the contract because they are not highly dependent on, or highly interrelated with, other promised goods or services in the contract. A good or service is distinct if the customer can benefit from the good or service on its own or with resources readily available to it. Otherwise distinct performance obligations may be combined and treated as a single performance obligation if they are not distinct in the context of the contract, meaning they are highly dependent on or interrelated with other promised goods or services in the contract.

Estimating Variable Consideration

Many companies provide goods or services at a price that depends upon certain future events occurring or not occurring. Examples include refund rights, performance bonuses, penalties, etc. Under current U.S. GAAP, the amount of revenue recognized is generally limited to the amount that is not contingent on a future event. Under the new standard, however, the seller must include some or all of an estimate of variable (or contingent) consideration in the transaction price (which is the amount to be allocated to each unit of account and recognized as revenue) when the seller concludes that it is probable that changes in its estimate of such consideration will not result in significant reversals of revenue in subsequent periods. This less restrictive guidance will most likely result in earlier recognition of revenue

under the new standard than under current U.S. GAAP.

Considering the Time Value of Money

Some contracts provide the customer or the seller with a significant financing benefit (explicitly or implicitly). This is because performance by the seller and payment by the customer may occur at significantly different times. In this case, the seller should adjust the transaction price for the time value of money if the contract includes a significant financing component.

Allocating the Transaction Price

Companies that sell multiple goods or services in a single arrangement will need to allocate the consideration to each of those goods or services. This allocation is based on the price the company would charge a customer on a standalone basis for each good or service. If the company doesn’t normally sell the goods or services on a standalone basis, the standalone selling price will have to be estimated. As a result, some companies will need to determine the standalone selling price of goods or services that have not previously required this assessment (e.g., companies that issue customer loyalty points).

OBSERVATION: Companies cannot presume that arrangements currently accounted for by using a percentage-of-completion method will meet the new requirements for recognition of revenue over time (i.e., revenue for certain arrangements may need to be recognized at a point in time). Conversely, companies with arrangements to manufacture (for which revenue is recognized at a point in time) may meet the new requirements for revenue recognition over time.

Evaluating Transfer of Control

Under the new standard, revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. Because control can be transferred over time or at a point in time, companies will need to apply new guidance to determine whether revenue should be recognized over time or at a point in time. As a result, the timing of revenue recognition could change for some companies compared to current guidance, which is more focused on the transfer of risks and rewards than the transfer of control.

Other Challenging Issues

Licenses

Companies that license their intellectual property (IP) to customers will need to determine whether the license transfers to the customer over time or at a point in time. A license that is transferred over time allows a customer access to the seller’s IP as it exists during the license period. Licenses that are transferred at a point in time allow the customer the right to use the seller’s IP as it exists when the license is granted. The customer must be able to direct the use of and obtain substantially all of the

remaining benefits from the licensed IP to recognize revenue when the license is granted. The new standard includes several examples to assist in making this assessment.

Contract Costs

Companies sometimes incur costs (such as sales commissions or mobilization activities) to obtain or fulfill a contract. Contract costs that meet certain criteria will be capitalized as an asset and amortized as revenue is recognized. Accordingly, more costs are expected to be capitalized in some situations. Management will also need to consider how to account for contract costs incurred for contracts that are not completed upon the adoption of the new standard.

Nonrefundable Upfront Fees

When a company collects nonrefundable upfront fees, (e.g., membership joining fees, setup fees, and activation fees) the seller must consider whether the fee relates to the transfer of a promised good or service to the customer. If the fee relates to the transfer of a promised good or service, the company will need to evaluate whether the good or service is distinct and must be accounted for separately. For example, a club may collect a nonrefundable upfront membership fee from a customer at the time that the customer purchases a one-year membership. The club uses the fee to cover the costs of certain initial setup activities, such as creating an account for the customer in the club’s system. These setup activities do not transfer any separate service to the customer. Therefore, the club recognizes the fee as revenue over the period of the customer’s membership.

Options for Additional Goods or Services

A seller may give a customer an option to acquire additional goods or services either for free or at a discounted price. In this case, the seller must consider whether the option gives rise to a separate performance obligation. The option creates a separate performance obligation if the option gives the customer a material right that the customer would not have been given without entering into the contract.

Options for a customer to acquire additional goods or services are prevalent in many industries. For example a coffee shop may provide a free cup after ten purchases; an airline may offer a frequent flier miles program in which the customer may redeem miles for a free or discounted ticket for a future flight; or a credit card company may provide an awards program in which the customer may trade in points for a statement credit, a gift card, a product, or other award. In these types of situations, the new standard requires the seller to take a step back and consider the substance of the transaction. For example, if a deli sells ten sandwiches to a customer for $5 each and provides the 11th sandwich for free, in substance, the deli has sold eleven sandwiches to the customer for $50. As a result, the new standard requires the deli to identify separate performance obligations for the free sandwich and each of the ten sandwiches sold at $5 each; the deli must allocate the $50 received among these separate performance obligations.

Seven Actions You Can Take Now

The impact of implementing this new standard may be felt across the entire company. Management will need to perform a comprehensive review of existing contracts, business models, company practices, accounting policies, information technology systems, and internal processes and controls to assess the extent of changes needed as a result of the new standard. This may be the case even if the company’s revenue recognition model is not significantly changed. Companies should consider the following seven steps in order to prepare for implementation.

1: Identify Areas Requiring Estimates and Judgments

Companies need to determine where the new standard requires management to make additional judgments, including estimates. The new standard represents a shift from a detailed rules-based approach for revenue recognition to a more high level principles-based approach. As a result, the model requires more judgment on the part of management than under prior guidance. Processes may need to be developed to capture management’s judgments and any subsequent changes on a timely basis. In addition, company estimates may be subject to the scrutiny of the Securities and Exchange Commission (SEC) or other regulators. Therefore, it is particularly important for companies to establish processes to create contemporaneous documentation to support their estimates. In addition, companies need to ensure that they are tracking any historical data necessary to develop their estimates.

2: Assess Information Systems

Companies will need to evaluate their current ability to collect and maintain the data necessary to comply with the new standard. Systems may need to be updated or upgraded to capture data needed for the additional estimates, judgments, and disclosures. This requires companies to assess their existing processes and systems, identify any gaps, and implement the necessary changes. For example, at present, many companies may have systems that track information about their contracts at the contract level. Under the new standard, however, a company may be required to either aggregate contracts or separate a contract into parts in order to properly account for revenue. Therefore, companies need to consider the capability of their systems to track information about their contracts on either a combined basis or at a sub-contract level.

3: Evaluate Contracts

Companies need to consider their existing contracts and identify any contract features or terms that may require additional analysis in order to apply the five-step model. For example, a contract that includes variable consideration requires more analysis to determine the transaction price than a contract with a fixed amount of consideration. As another example, a contract that provides the customer with both a good and a service must be assessed to identify the separate performance obligations in the contract.

In addition, management needs to make sure that sales staffs grasp the implications of the new model

on the deals they’re making with customers. A written contract may, for instance, merely describe a particular price for a particular set of goods. However, if the salesperson speaks to the customer and offers a discount on an additional set of goods as an incentive to buy more, such oral considerations often must be valued and recognized.

Companies may also decide to reevaluate how their contracts with customers are priced. For instance, a company may decide that its operations will be more manageable going forward if the company updates its contract pricing to more closely align the timing of when it bills a customer and the timing of when the company will be required to recognize revenue under the new standard.

4: Consider the Impact on Other Areas

Companies will need to consider whether the changes to the accounting for revenue will affect other areas of the companies’ operations, such as their tax planning strategies, debt covenants, and compensation structures (such as commissions or bonuses that are affected by revenue amounts).

• Human Resources: Staff bonuses and incentive plans may need to be reconsidered. Any change in the timing of revenue recognition could affect bonuses tied to corporate sales or income. Management should consider structuring compensation plans to avoid changes spurred merely by the new model.

• Tax Planning: Tax changes caused by changing the timing and amounts of revenue, expenses, and capitalized costs may require adjustments to tax planning. The timing of a company’s tax payments could change if its recognized revenue changes. More broadly, increasing topline volatility could upset corporate tax plans.

• Debt Covenants: Without any actual change in a borrower’s business, a change in revenue recognized would trigger changes in key metrics on which loans are often based, including net income; earnings before taxes; or earnings before interest, taxes, depreciation and amortization (EBITDA). Lenders should also be alerted to the fact that the borrower’s reported sales over time may not be as smooth as they once were.

5: Communicate with Stakeholders

Investors and other stakeholders will want to understand the impact on the business. Management may wish to prepare an analysis of how the new standard will affect the company’s bottom line. This analysis will not only give insight to management, but also prepare the company in case it wants to communicate with stakeholders regarding the potential effects of the standard on its financial results.

6: Review Disclosure Requirements

Companies need to review the nature and amount of disclosures required under the new standard in order to evaluate whether they have the data necessary to provide the required disclosures. In general, the new standard requires enhanced disclosures about the assumptions and methodologies used to form estimates. Companies may wish to begin creating a draft of these disclosures.

7: Evaluate Transition Methods

Companies that expect changes to the timing or amount of their revenue recognition should start thinking about which transition method to use to apply the new standard. Sufficient early planning helps ensure that the company maintains the records necessary to comply with the transition method selected. The transition methods available are:

• A retrospective approach that provides certain optional practical expedients; and • A retrospective approach under which the cumulative effect of adopting the standard is

recognized at the date of the initial application.

Since both transitional methods involve retrospective application, companies will need to find and gather information about both past and outstanding contracts.

Effective Date and Transition

The new guidance is effective for public entities in annual reporting periods beginning after December 15, 2017 and the interim periods within that year. Public entities include: (a) public business entities, (b) not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market and (c) employee benefit plans that file or furnish financial statements to the Securities and Exchange Commission (SEC). As such, for a public business entity with a calendar year end, the new guidance is effective on January 1, 2018 for both its interim and annual reporting periods. For all other entities (e.g., private companies), the new guidance is effective in annual reporting periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. As such, for a private company with a calendar year end, the new guidance is effective for the year ending December 31, 2019 and for interim periods in the year ending December 31, 2020.

The transition alternatives that an entity must choose between when initially applying the new guidance include the full retrospective transition method and the modified retrospective transition method:

• Full retrospective transition method. This method involves retrospective application to all periods presented with the option to elect one or more of four practical expedients.

Modified retrospective transition method. This method involves application of the new guidance to either: (a) all contracts at the date of initial application or (b) only contracts that are not completed at the date of initial application. Under this method, a cumulative effect adjustment is recognized as of the date of initial application (which is January 1, 2018 for a public business entity with a calendar year end that adopts the new guidance as of the effective date). In addition, a variety of information must be disclosed under this transition method, including the effects of applying the new guidance in the period of adoption. In other words, an entity must determine and disclose the amount of revenue and related costs it would have recognized in the period of adoption if it had continued to apply legacy U.S. GAAP in that period.

OBSERVATION: If you have questions or need more information related to the new revenue recognition standard, please contact your Elliott Davis Decosimo adviser. We have a questionnaire designed to help clients identify the significant changes that may occur to their revenue recognition and cost policies as a result of ASC 606. In addition, we have a checklist to assist clients in their transition to and initial application of ASC 606.

Quarterly Accounting Update: Regulatory Update

SEC Updates Revenue Recognition Interpretive Guidance

On August 18, 2017, the SEC issued two interpretive releases and a related Staff Accounting Bulletin to update its interpretive guidance to reflect the adoption of the FASB’s new revenue recognition standard. The updates include Release No. 33-10402, Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements and Release No. 33-10403, Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile.

Release No. 33-10402 explains that public companies should no longer follow the guidance for bill-and-hold transactions in Accounting and Auditing Enforcement Release (AAER) No. 108, In the Matter of Stewart Parness, once they adopt Accounting Standards Codification (ASC) 606, Revenue From Contracts With Customers. In a bill-and-hold transaction, the seller can recognize the revenue from the sale before delivering the goods to the customer. Until companies adopt ASC 606, they should continue applying AAER No. 108.

Release No. 33-10403 states that companies should continue to refer to the interpretive guidance from December 2005, Release No. 33-8642, Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile, until they adopt ASC 606.

In addition, the SEC published Staff Accounting Bulletin (SAB) No. 116 to modify some of the existing guidance for revenue recognition in its series of Staff Accounting Bulletins to match ASC 606. According to SAB No. 116, the guidance in SAB Topic 13, Revenue Recognition, and SAB Topic 8, Retail Companies, will no longer be applicable once a company adopts ASC 606. The guidance in Section A, Operating-Differential Subsidies of SAB Topic 11, Miscellaneous Disclosure, is being revised to clarify that the revenues from the operating-differential subsidies presented under a revenue caption should be presented separately from the contract revenue reported according to ASC 606.

Requirement for Inline XBRL on SEC’s Agenda for Spring 2018

According to the SEC’s updated regulatory agenda, the agency is planning to finalize a rule to require public companies to embed interactive data tags directly into their financial statements in the spring of 2018. In June 2016, the SEC issued a rule that allowed companies to voluntarily use inline XBRL in Forms 6-K, 8-K, 10-Q, 10-K, 20-F, and 40-F.

Currently, companies have been required to submit XBRL statements as separate exhibits to financial statements. The SEC believes the two-stage financial statement process contributes to errors in tagging data, inconsistencies, and other problems that undermine the quality of the information. If the rule becomes final, the interactive data tags will no longer be used for a separate set of financial statements filed as an exhibit but instead included the financial statements that are in the primary regulatory

report. Investment companies would also be required to provide risk and return summaries using inline XBRL.

SEC Updates C&DIs for Disclosure Requirements for Emerging Growth Companies

On August 17, the SEC issued an update to its Compliance and Disclosure Interpretations (C&DIs) to clarify what historical financial information emerging growth companies (EGCs) can omit from their registration statements. The update deals with changes to disclosure rules under the Fixing America’s Surface Transportation (FAST) Act, a 2015 transportation funding bill that contained a series of tweaks to securities laws.

EGCs were created under the JOBS Act, which carved out a host of accounting and disclosure benefits for them, including an exemption from the auditor attestation requirements in Sarbanes-Oxley’s Section 404(b), and the ability to file confidential draft initial public offering (IPO) paperwork before revealing the documents to the public. The JOBS Act also allowed EGCs to include only two years of audited financial statements in their IPO registration statements, instead of the standard three years. The FAST Act gave an EGC additional flexibility to omit historical financial data that it reasonably believes will not be required at the time of the offering. The SEC issued interim final rules for the changes in January 2016 and this update to the SEC’s CD&Is was issued to explain the specifics of what financial information a filer can omit under the FAST Act.

While the relief provided under the FAST Act is only available to EGCs, a non-EGC issuer can – under a recent staff policy – also omit from its draft registration statement interim and annual financial information that it reasonably believes it will not be required to present separately at the time it files its registration statement publicly.

SEC Unsure About Rulemaking Path for Bitcoin-Based Products

Despite the growth in exchange-traded funds (ETFs) and other types of exchange-traded products (ETPs) over the last quarter century and the more recent phenomenon surrounding bitcoin and other virtual currencies, the SEC has been hesitant to approve ETPs based on a virtual currency. In March 2017, the SEC rejected an application from Tyler and Cameron Winklevoss to launch a bitcoin-based ETF because of the market’s lack of regulation. But the SEC said in April that it will review its decision.

During the SEC-NYU Dialogue on Securities Market Regulation on September 8, in Washington, regulators remained unsure about how they can supervise the market for virtual currency securities. Unlike the traditional ETFs in which there are agreements between the stock exchanges that trade the funds, the bitcoin market is still in its early stages of development.

House Passes Bill to Extend Regulation A Offerings

The House of Representatives on September 5, 2017, passed a bill to let companies whose stock is traded over the counter raise funds using the SEC’s Regulation A exemption. H.R. 2864, the Improving

Access to Capital Act, passed unanimously out of the Financial Services Committee in June, and it is one of a few proposed changes to securities laws to win wide bipartisan support in a deeply divided Congress. If H.R. 2864 is signed into law, it would represent one of the first significant changes to Regulation A since the exemption was overhauled in Title IV of the JOBS Act.

The bill builds on the SEC’s 2015 rules in Release No. 33-9741, Amendments to Regulation A, which expanded Reg A to let privately held companies raise as much as $50 million in unregistered offerings. Before the JOBS Act, the exemption had been mostly abandoned by start-up companies due to two major drawbacks: companies could only raise $5 million, and they had to comply with the state-level antifraud securities laws called “blue sky” regulations. The revamped exemption, instead, gives issuers two paths to raising capital: “Tier 1” offerings can run as high as $20 million, while subjecting companies to blue sky review. “Tier 2” offerings can run as high as $50 million, while avoiding state regulators. Tier 2 offerings, however, are subject to the more stringent federal filing requirements.

H.R. 2864 also removes the prohibition of Regulation A offerings by companies subject to the SEC’s reporting regime in Section 13 or Section 15(d) of the Securities Exchange Act of 1934, which includes over-the-counter securities.

Revenue Standard’s Implementation Process Leads to Spike in Requests for Staff Interpretations

As public companies implement the FASB’s revenue standard in time for its 2018 effective date, questions to the SEC have increased dramatically, largely because of the extra judgment the standard requires for many types of revenue decisions. The market regulator’s staff expects to continue using the questions it receives and the responses it provides in speeches, industry conferences, and other public presentations to help financial reporting professionals who are addressing similar questions.

Interpretive Guidance Issued to Ease Compliance with Pay Ratio Disclosure Rule

On September 21, 2017, the SEC issued interpretive guidance to ease compliance with the commission’s pay ratio disclosure rules. The Dodd-Frank rules, issued in 2015 in Release No. 33-9877, Pay Ratio Disclosure, require public companies to disclose a ratio comparing their chief executive’s compensation with that of the median worker. Partly because of the complexity of identifying that median worker, the commission allowed for an unusually long lead-time for the new disclosure, which companies will need to include for the first time in their 2018 proxy statements.

The SEC issued interpretive guidance in Release No. 33-10415, Commission Guidance on Pay Ratio Disclosure, which explains that the pay ratio calculation may involve a degree of imprecision. The guidance also states that if a registrant uses reasonable estimates, assumptions or methodologies, the pay ratio and related disclosure that results from such use would not provide the basis for commission enforcement action unless the disclosure was made or reaffirmed without a reasonable basis or was provided other than in good faith.

Along with the guidance, the SEC’s Division of Corporation Finance issued a more specific set of instructions on pay ratio calculation methods in Division of Corporation Finance Guidance on Calculation of Pay Ratio Disclosure, and updated its Compliance and Disclosure Interpretations (C&DIs) to answer additional pay ratio questions in its Compliance & Disclosure Interpretations (C&DIs) for Regulation S-K. In Division Guidance, the SEC staff answers technical questions related to the use of statistical sampling methods and reasonable estimates to identify the median employee. In the C&DI update, the SEC staff answers one question related to the selection of appropriate compensation measures for the median employee. In another entry, staff makes it clear it would not object if companies described the pay ratio as an “estimate.”

Taken together, the three guidance documents represent an effort by an SEC, led by new Republican-appointed chairman Jay Clayton, to soften the blow of an Obama-era rule that has been widely criticized by GOP lawmakers and industry groups. Defenders of pay ratio disclosure say the rule is necessary to reveal pay disparities between public company CEOs and their rank-and-file workers. The rule proponents say the information is useful for investors’ decision-making because companies with wide pay disparities may be plagued by weak corporate governance. Opponents call the measure an exercise in executive shaming, and cast it as an example of creeping social policy in the SEC’s disclosure regime in Regulation S-K under the Securities Act of 1933.

SEC Plans to Take Action in October on PCAOB Rule to Expand Auditor’s Report

The SEC will consider approving by October 26, 2017, a controversial PCAOB rule to expand the auditor’s report in regulatory filings. The SEC must approve the PCAOB’s standards before they become effective. Section 19(b)(2)(A) of the Securities Exchange Act of 1934 gives the SEC 45 days to act after publishing the PCAOB’s rule for public comment in the Federal Register. The provision allows the SEC to extend the period by an additional 45 days if the agency determines that a longer period is appropriate.

The SEC in July issued Release No. 34-81187, Notice of Filing of Proposed Rules on the Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, and Departures From Unqualified Opinions and Other Reporting Circumstances, and Related Amendments to Auditing Standards, to solicit public input about the PCAOB rule, published in June.

If the SEC approves the rule, it will represent the first significant change to the content of the auditor’s report since the 1940s. Currently, the auditor’s report is based on a brief pass-fail model, and Release No. 2017-001 requires auditors to add a description of the critical audit matters (CAMs) that arose while auditing their clients’ financial statements. The PCAOB defines critical matters as issues that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex judgments from the auditor.

Release No. 2017-001 also requires accounting firms to include tenure, or how long they have audited their clients. Audit reports must also include the phrase “whether due to error or fraud” in describing

the auditor’s responsibility to ensure that the financial statements are accurate. It has to include a statement that the auditor is required to be independent. The final rule standardizes the form of the auditor’s report with the opinion appearing in the first section. Section titles have been added to guide the reader, and the report will be addressed to the company’s shareholders and board of directors.

The new format would become effective for audits of fiscal years ending on or after December 15, 2017, according to the PCAOB’s release. Auditors will have to start communicating CAMs of public companies with more than $700 million in market value for audits for fiscal years ending on or after June 30, 2019. For companies below that threshold, the effective date is December 15, 2020, but the requirements will not apply to audits of emerging growth companies, which have less than $1 billion in revenue. This class of companies created by the JOBS Act gets a host of regulatory breaks for five years after becoming public.

The planned rule has been controversial. In comment letters, business groups and public companies said they opposed the new requirements because the costs outweigh the benefits. They believe auditors may sidestep their role and reveal information that management has not disclosed, create a chilling effect on the audit committee and auditor relationship and create more legal liability risks. But investor advocates—who have been pushing for the rule before the PCAOB started its work about seven years ago—said the SEC should approve the rule because more auditor insight about a client’s financial condition would make the auditor’s report more useful and relevant for decisions about investments and shareholder votes.

COSO Updates ERM Framework

On September 6, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) updated its Enterprise Risk Management—Integrated Framework, with Enterprise Risk Management — Integrating With Strategy and Performance.

The updated framework discusses enterprise risk management (ERM) relative to the changes in business arising from developments in the financial markets, the emergence of new technologies, and demographic changes. The Framework is organized into five parts to help executives devise strategies and manage risk and enhance risk awareness, oversight and reporting for management and boards.

Quarterly Accounting Update: Other Developments

GASB Guidance Establishes Single Approach for Reporting Leases

On June 28th, the Governmental Accounting Standards Board (GASB) issued a new standard with guidance that establishes a single approach to accounting for and reporting leases by state and local governments. The new standard, GASB Statement 87, Leases, is based on the principle that leases are financing of the right to use an underlying asset. Statement 87 provides guidance for lease contracts for nonfinancial assets—including vehicles, heavy equipment, and buildings—but excludes nonexchange transactions, including donated assets, and leases of intangible assets (such as patents and software licenses). Statement 87 provides exceptions from the single-approach for short-term leases, financial purchases, leases of assets that are investments, and certain regulated leases. Statement 87 also addresses accounting for lease terminations and modifications, sale-leaseback transactions, nonlease components embedded in lease contracts (such as service agreements), and leases with related parties.

Lessee Accounting

Under the new standard, a lessee government is required to recognize a lease liability and an intangible asset representing the lessee’s right to use the leased asset. The liability should be the present value of the payments covered by the contract, and its value should be reduced as payments are made over the lease’s term. The asset should equal the initial measurement of the liability. A lessee also will report the following in its financial statements:

• Amortization expense for using the lease asset (similar to depreciation) over the shorter of the term of the lease or the useful life of the underlying asset

• Interest expense on the lease liability • Note disclosures about the lease, including a general description of the leasing arrangement,

the amount of lease assets recognized, and a schedule of future lease payments to be made

Lessor Accounting

A lessor government is required to recognize a lease receivable and a deferred inflow of resources. A lessor will continue to report the leased asset in its financial statements. A lessor also will report the following in its financial statements:

• Lease revenue, systematically recognized over the term of the lease, corresponding with the reduction of the deferred inflow

• Interest revenue on the receivable • Note disclosures about the lease, including a general description of the leasing arrangement

and the total amount of inflows of resources recognized from leases

Effective Date and Transition

The provisions of Statement 87 are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged.

FASB Exploring Bitcoin Guidance

As the digital currency Bitcoin becomes more of a household name, the FASB is considering whether it needs to develop accounting guidance for digital currencies. The FASB’s examination of digital currency follows a request from the Digital Chamber of Commerce, a trade group representing the blockchain industry, to clear up accounting questions that have cropped up in the growing digital currency market. The organization in a June 8, 2017, letter called on the FASB to create guidance to address when to recognize digital currency and how to measure it.

Bitcoin is the biggest name in the digital currency business, but there are other, growing competitors in the market such as Ethererum and Ripple. The technology underpinning digital currency, blockchain, is a secure, distributed database for maintaining a record of transactions. Proponents of digital currency and blockchain technology view it as a potential business game changer, likening its rise to the development of the internet. Use and acceptance of digital currencies as a method of payment is far from universal, however, and it is banned in some countries. In May, hackers demanded victims of the WannaCry cyberattack to pay ransom with Bitcoin to unlock their computer data, raising questions about criminals using digital currency.

Still, supporters say there is an increasing volume of digital currency transactions and point to major companies such as Microsoft Corp., Dell Inc., and Overstock.com accepting digital currency as payment. In addition to being used as a form of payment, digital currency also is held as an asset by businesses, which can sell the currency when its value goes up.

As there is a lack of clear guidance for these digital currencies, there is currently a diversity of views on the accounting. Some financial professionals believe digital currency should be accounted for under ASC 305, Cash and Cash Equivalents; others say ASC 825, Financial Instruments, applies to electronic money; while others consider ASC 350, Intangible Assets, or ASC 330, Inventory, the more appropriate accounting guidance.

The Digital Chamber of Commerce believes that the FASB should develop an accounting model that would allow businesses to recognize the digital currency when they control the associated economic benefits and measure the currency at fair value with changes recorded in income. This is similar to a position the Australian Accounting Standards Board took in December 2016 when it presented a paper to the IASB’s main advisory panel, the Accounting Standards Advisory Forum (ASAF), suggesting the international board investigate consistent accounting for digital currency.

Lease Standard’s 2019 Effective Date Remains Intact

Despite questions from some businesses about the difficulty they are having implementing the FASB’s lease accounting standard, the 2019 effective date for public companies increasingly looks like it will remain unchanged. A FASB spokesperson on August 29, 2017, confirmed that the board was not considering a recent request to add extra time for companies to follow the new accounting.

On July 11, the American Petroleum Institute asked the FASB to consider giving companies an extra two years to comply with ASU 2016-02, Leases. Calling the new rules a dramatic change that will involve more complex and time-consuming analysis than businesses anticipated, the trade group said a 2021 effective date was more realistic than 2019. API said the problem with implementing the new accounting was not necessarily with the high-dollar lease contracts but the numerous small-dollar rental arrangements that need to be evaluated. Member companies currently estimate that the number of assets falling in scope of the ASU range from 1,000 to 30,000, excluding easements and right-of-way agreements which can number up to 100,000 for an individual company. In addition, software to help companies enter the data is not available yet.

To address some of these concerns, the FASB on August 2 unanimously agreed to draft a proposal that would exempt companies with land easements from having to review their existing contracts to determine if they qualify as leases and subject to the new lease accounting rules. API said the FASB’s forthcoming proposal will be a relief to the industry, but the trade group is still concerned about meeting the schedule for complying with the overall lease standard.

Memo for Credit Loss Standard to Explain Accounting for Troubled Debt Restructurings

The FASB on September 6, 2017, unanimously agreed to clarify the guidance for a type of loan modification called a troubled debt restructuring in its credit loss standard. The FASB said its decision will not result in a formal amendment to ASU 2016-13, Measurement of Credit Losses on Financial Instruments. Instead, the board plans to publish a memo about its discussion of the guidance for restructured loans. The FASB agreed that lenders must identify and measure the effects of the restructuring when the individual troubled loan is identified. In some circumstances, such as when restructuring information is not available, banks can apply what the FASB called a “portfolio-level” approach—making estimates based on known historic data. When a bank carries out the loan restructuring, it may make an additional adjustment if there is a difference between the loss it expected and the actual loss it incurred. The FASB also agreed to not specify a particular method for calculating the loss from a restructured loan.

The FASB’s advisory panel for the credit loss standard, the Transition Resource Group, last met in June, and questions about the troubled debt restructurings dominated the meeting. The board plans to meet in early October to address another question from that meeting — how to consider losses on credit card receivables, a FASB staff member said.

Quarterly Accounting Update: On the Horizon

The following selected FASB exposure drafts and projects are outstanding as of September 30, 2017.

Balance Sheet Classification of Debt

The purpose of this project is to reduce cost and complexity by replacing the fact-pattern specific guidance in U.S. GAAP with a principle to classify debt as current or noncurrent based on the contractual terms of a debt arrangement and an entity’s current compliance with debt covenants.

On January 10, 2017, the FASB issued a proposed ASU on determining whether debt should be classified as current or noncurrent in a classified balance sheet. In place of the current, fact-specific guidance in ASC 470-10, the proposed ASU would introduce a classification principle under which a debt arrangement would be classified as noncurrent if either (1) the “liability is contractually due to be settled more than one year (or operating cycle, if longer) after the balance sheet date” or (2) the “entity has a contractual right to defer settlement of the liability for at least one year (or operating cycle, if longer) after the balance sheet date.” Under an exception to the classification principle, an entity would not classify debt as current solely because of the occurrence of a debt covenant violation that gives the lender the right to demand repayment of the debt, as long as the lender waives its right before the financial statements are issued (or are available to be issued).

Many businesses, professional groups, and some auditors criticized the proposal in their comment letters. But others, including a majority of the FASB’s Private Company Council (PCC) at a meeting in July, stated the FASB’s proposal made sense and would simplify U.S. GAAP’s myriad, fact-specific rules about debt classification. Proponents of the changes also said that by the time the updated guidance became effective, the public would have a better idea about the principles behind the changes. Regulators also potentially could adapt their rules so companies that reported higher short-term debt solely because of the accounting change would not be disqualified from projects.

On September 13, 2017, the FASB approved the update 6-1. The FASB agreed that public companies would have to comply with the new guidance for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Private companies and other organizations would not have to follow the revised guidance until their fiscal years that begin after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. All organizations can apply the amendments early.

Land Easement Practical Expedient for Lease Transition

On September 25, 2017, the FASB issued a proposed ASU to provide a practical expedient for transition to ASC 842, Leases. The amendments in this proposed ASU would clarify that land easements are required to be assessed under ASC 842 to determine whether the arrangements are or contain a lease. The amendments would also permit an entity to elect a transition practical expedient to not apply ASC 842 to land easements that exist or expired before the effective date of ASC 842 and that were not

previously assessed under ASC 840, Leases. An entity would be required to apply the practical expedient consistently to all of its existing or expired land easements that were not previously assessed under ASC 840. An entity would continue to apply its current accounting policy for accounting for land easements that existed before the effective date of ASC 842. Once an entity adopts ASC 842, it would apply that guidance prospectively to all new (or modified) land easements to determine whether the arrangement should be accounted for as a lease.

GASB Proposal to Require More Disclosures About Debts

On July 12, 2017, the GASB released a proposal to require state and local governments to disclose more information in their financial statement footnotes about their debts. Specifically, the proposal calls for state and local governments to provide more information about the amounts of their lines of credit they have not yet used, the collateral pledged to secure debt, and the specific terms in debt agreements among other things. The proposal also includes proposed guidance that would clarify which liabilities governments should include in their footnote disclosures related to debt.

Clarification for Not-for-Profits’ Accounting for Contributions

On August 3, 2017, the FASB is issued a proposed ASU to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments in this proposed ASU would assist entities in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) within the scope of ASC 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to other guidance and (2) distinguishing between conditional contributions and unconditional contributions.

The amendments in this proposed ASU would clarify and improve current guidance about whether a transfer of assets is an exchange transaction or a contribution. The proposed amendments would clarify how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred on the basis of the following:

1. A resource provider (including a private foundation, a government agency, or other) is not synonymous with the general public. Indirect benefit received by the public as a result of the assets transferred is not equivalent to commensurate value received by the resource provider.

2. Execution of a resource providers’ mission or the positive sentiment from acting as a donor would not constitute commensurate value received by a resource provider for purposes of determining whether a transfer of assets is a contribution or an exchange.

The amendments in this proposed Update would require that an entity determine whether a contribution is conditional on the basis of whether an agreement includes a barrier that must be overcome and either a right of return of assets transferred or a right of release of a promisor’s obligation to transfer assets.

Expanded Inventory Disclosures Proposed

On January 10, 2017, the FASB issued a proposed ASU, Disclosure Framework—Changes to the Disclosure Requirements for Inventory, which calls on businesses to provide more detailed disclosures about their raw materials and finished goods.

The proposed ASU would require business to disclose their inventory by component, such as by raw materials, finished goods, supplies, and works-in-process. Businesses also would have to break down how their inventory is measured. Businesses use a variety of measurement techniques for inventory, including last-in, first-out (LIFO), first-in, first-out (FIFO), LIFO retail inventory method, or weighted average. Significant shrinkage, spoilage, damage or other unusual transactions or circumstances affecting inventory balances also would have to be disclosed.

Additionally, businesses would have to describe the types of costs capitalized into inventory, the effect of LIFO liquidations on income, and the replacement cost of LIFO inventory.

The comment period for this proposed ASU closed on March 13. The FASB is currently redeliberating the proposed ASU in light of the comments received.

Nonemployee Share-Based Payment Accounting Improvements

The purpose of this project is to reduce cost and complexity and improve the accounting for nonemployee share-based payment awards issued by public and private companies.

On March 7, 2017, the FASB issued a proposed ASU that would simplify the accounting for share-based payments granted to nonemployees for goods and services. Under the proposal, most of the guidance on such payments would be aligned with the requirements for share-based payments granted to employees.

Disclosure Framework

The disclosure framework project consists of two phases: (1) the FASB’s decision process and (2) the entity’s decision process. The overall objective of the project is to improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of each entity’s financial statements. Although reducing the volume of the notes to financial statements is not the primary focus, the FASB hopes that a sharper focus on important information will result in reduced volume in most cases.

In March 2014, the FASB issued an Exposure Draft, Conceptual Framework for Financial Reporting: Chapter 8 Notes to Financial Statements, intended to improve its process for evaluating existing and future disclosure requirements in notes to financial statements. Specifically, it addresses the FASB’s process for identifying relevant information and the limits on information that should be included in notes to financial statements. If approved, it would become part of the FASB’s Conceptual Framework, which provides the foundation for making standard-setting decisions.

In September 2015, the FASB issued two proposals—one about the use of materiality by reporting entities, Assessing Whether Disclosures Are Material, and the other amending the Conceptual Framework’s definition of materiality, Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics of Useful Financial Information. These two proposals were issued to help entities decide what information should be included in their footnotes without bogging them down with extra details.

The main provisions would draw attention to the role materiality plays in making decisions about disclosures. More specifically, the proposed ASU explains that: (a) materiality would be applied to quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements as a whole; therefore, some, all, or none of the requirements in a disclosure Section may be material; (b) materiality would be identified as a legal concept; and (c) omitting a disclosure of immaterial information would not be an accounting error.

Consolidation Reorganization

On November 2, 2016, the Board added this project to its technical agenda. Further, it tentatively decided to (1) clarify the consolidation guidance in ASC 810, Consolidation, by dividing it into separate Codification subtopics for voting interest entities and variable interest entities (VIEs); (2) develop a new Codification topic that would include those reorganized subtopics and would completely supersede ASC 810; (3) rescind the subsections on consolidation of entities controlled by contract in ASC 810-10-15 and in ASC 810-30 on research and development arrangements; (4) further clarify that power over a VIE is obtained through a variable interest; and (5) provide further clarification of the application of the concept of “expected,” which is used throughout the VIE consolidation guidance.

At its March 8, 2017, meeting, the FASB discussed the feedback received at its December 16, 2016, public roundtable and voted to move forward with a proposed ASU that reorganizes the consolidation guidance.

Targeted Improvements to VIE Guidance

At its March 8, 2017, meeting, the FASB decided to add to its agenda a project on an elective private-company scope exception to the VIE guidance for entities under common control and certain targeted improvements to the existing related-party guidance in the VIE model. On May 18, 2017, the FASB directed the staff to draft a proposed ASU for a vote by written ballot. The exposure draft was issued in June.

EITF Agenda Items

At its July 2017 meeting, the FASB’s Emerging Issues Task Force (EITF) held initial deliberations on accounting for implementation costs in a cloud computing arrangement that is considered a service contract.

EITF Discussion

In May 2017, the FASB asked the EITF to address the customer’s accounting for implementation costs in a cloud computing arrangement that is considered a service contract. The objective of this issue is to reduce diversity in practice.

The FASB previously issued guidance about a customer’s accounting for a cloud computing arrangement that includes a software license. If the cloud computing arrangement contains a license, it is accounted for consistent with other licenses of internal-use software in accordance with ASC 350-40. Under that guidance, implementation costs incurred in the preliminary and post-implementation phases are expensed, while costs incurred in the application development phase are either expensed or capitalized, depending upon the type. If the cloud computing arrangement does not include a software license, it is accounted for as a service contract. However, there is no specific guidance as to how to account for the related implementation costs. As a result, there is diversity in practice.

At the July 20, 2017 meeting, the Task Force was asked to consider four proposed accounting alternatives for implementation costs in a cloud computing arrangement that is considered a service contract. The Task Force will continue deliberations at a future meeting.

OBSERVATION: The announcement affects entities that meet the definition of a PBE solely because their financial statements or financial information is included in a registrant’s filing. This is the case when a registrant’s equity method investee is considered significant under Rule 3-09 or Rule 4-08(g) of Regulation S-X.

As a result of this announcement, the investee’s information included in the SEC filing and the registrant’s associated income or loss pick-up under the equity method of accounting would not be required to reflect the adoption of the new revenue and leases standards in accordance with the PBE timeline.

Similarly, this announcement applies to financial statements that are required to be filed under Rule 3-05 of Regulation S-X when a registrant acquires a private company that does not otherwise meet the definition of a PBE.

SEC Staff Announcement at EITF Meeting

The new revenue and leases standards are effective for PBEs for annual reporting periods beginning after December 15, 2017 and fiscal years beginning after December15, 2018, respectively. Most other entities have an additional year to adopt. Stakeholders have inquired about the application of effective dates of these standards by entities that meet the definition of a PBE solely because their financial statements or financial information are included in another entity’s SEC filings.

The SEC announced that the SEC staff would not object to a PBE that meets the definition of a PBE solely due to the inclusion of its financial statements or financial information in another entity’s filing with the

SEC adopting the new standards using the effective dates for private companies. That is, such entities could adopt (1) the new revenue standard for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019, and (2) the new leases standard for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

These entities may still elect to adopt the new revenue and leases standards in accordance with the effective dates for PBEs. This announcement does not apply to entities that meet any of the other criteria of a PBE.

PCC Activities

The Private Company Council (PCC) met on July 11, 2017. At the meeting, PCC and FASB members shared stakeholder input from the private company Town Hall meeting on June 13, 2017 as part of the AICPA National Advanced Accounting and Auditing Technical Symposium (NAAATS). The FASB staff delivered updates (and the PCC provided input) on the following FASB projects:

• Consolidation Targeted Improvements to Related Party Guidance for Variable Interest Entities. PCC members discussed feedback from NAAATS, expressed support, and commended the Board for the private company alternative, which, as proposed, would provide a scope exception from the application of the VIE guidance to companies under common control when certain requirements are met.

• Liabilities and Equity—Targeted Improvements. PCC members supported the FASB’s standard that simplifies the accounting of financial instruments with “down rounds.”

• Cloud Computing (EITF Issue No. 17-A). The PCC confirmed that accounting for implementation costs in a cloud computing arrangement is a prevalent issue among private companies. A PCC member also recommended that the FASB provide application guidance to discern types of implementation costs that may be appropriate for capitalization.

• Nonemployee Share-Based Payment Accounting Improvements. The PCC discussed feedback and expressed support for the private company alternatives within the proposal.

• Invitation to Comment (ITC) on Agenda Consultation. Many PCC members expressed support for the FASB’s continuing implementation and education efforts for recently issued standards. The PCC also recommended that the FASB should remain cognizant of the pace of change when considering possible new projects.

• Balance Sheet Classification of Debt. A majority of PCC members recommended that the FASB finalize the proposed guidance with minor improvements on balance sheet presentation. PCC members also expressed interest in helping the Board determine appropriate transition provisions and educational efforts.

The PCC also met on September 19, 2017. At the meeting, PCC and FASB members shared stakeholder input from the private company Town Hall meeting on August 31, 2017. The FASB staff delivered

updates (and the PCC provided input) on the following FASB topics:

• Cloud Computing (EITF Issue No. 17-A). PCC members provided input on the alternatives presented to account for costs for implementation activities incurred in a cloud computing arrangement that is considered a service contract.

• Balance Sheet Classification of Debt. The FASB staff discussed the Board’s recent decisions on the project. PCC members provided suggestions to improve clarity. PCC members expressed a commitment to work with the Board and staff on ways to educate stakeholders on the requirements of the new standard.

• Readily determinable fair value. The PCC discussed the FASB staff’s research on the topic. A PCC member observed that the topic would also benefit from educational initiatives.

The next private company Town Hall is being planned for November 2017. The FASB staff is also planning private company Town Halls for 2018. The next PCC meeting will be held on Friday, December 8, 2017.

APPENDIX A

Important Implementation Dates

The following table contains significant implementation dates and deadlines for FASB/EITF/PCC and GASB standards.

FASB/EITF/PCC Implementation Dates

Pronouncement Affects Effective Date and Transition

ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities

Entities that elect to apply hedge accounting

Effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein. Effective for all other entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. All entities are permitted to early adopt the new guidance in any interim or annual period after issuance of the ASU.

ASU 2017-11, (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

Entities that issue financial instruments that include down round features

Effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Effective for all other entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

ASU 2017-10, Determining the Customer of the Operation Services—a consensus of the Emerging Issues Task Force

Operating entities with service concession arrangements within the scope of ASC 853, Service Concession Arrangements

Dependent upon the adoption of ASC 606, Revenue from Contracts with Customers.

ASU 2017-09, Scope of Modification Accounting

Entities that provide share-based payment awards.

Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The amendments should be applied prospectively to an award modified on or after the adoption date.

Pronouncement Affects Effective Date and Transition

ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities

Entities that hold investments in callable debt securities held at a premium

Effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period.

ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Entities that offer defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under ASC 715.

Effective for public business entities for interim and annual periods beginning after December 15, 2017. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods in the subsequent annual period. Early adoption is permitted as of the beginning of any annual period for which an entity’s financial statements have not been issued or made available for issuance.

ASU 2017-06, Employee Benefit Plan Master Trust Reporting—a consensus of the Emerging Issues Task Force

Entities within the scope of ASC 960, ASC 962, or ASC 965.

Effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. An entity should apply the amendments retrospectively to each period for which financial statements are presented.

ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets

All entities. See the Effective Date and Transition of ASU 2014-09, below.

ASU 2017-04, Simplifying the Test for Goodwill Impairment

All entities. Effective for public business entities that are SEC filers for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. For public business entities that are not SEC filers, the amendments are effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2020. For all other entities, including not-for-profit entities, the amendments are effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

Pronouncement Affects Effective Date and Transition

ASU 2017-03, Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings

All entities. Effective upon issuance.

ASU 2017-02, Clarifying When a Not-for-Profit Entity That Is a General Partner or a Limited Partner Should Consolidate a For-Profit Limited Partnership or Similar Entity

Not-for-profit entities. Effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period.

ASU 2017-01, Clarifying the Definition of a Business

All entities. Effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

All entities. See the Effective Date and Transition of ASU 2014-09, below.

ASU 2016-19, Technical Corrections and Improvements

All entities. Effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance: effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.

Pronouncement Affects Effective Date and Transition

ASU 2016-18, Restricted Cash (a consensus of the FASB Emerging Issues Task Force)

All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The amendments should be applied using a retrospective transition method to each period presented.

ASU 2016-17, Interests Held through Related Parties That Are under Common Control

All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Entities that have not yet adopted the amendments in ASU 2015-02 are required to adopt the amendments at the same time they adopt the amendments in ASU 2015-02 and should apply the same transition method elected for the application of ASU 2015-02.

Entities that already have adopted the amendments in ASU 2015-02 are required to apply the amendments retrospectively to all relevant prior periods beginning with the fiscal year in which the amendments in ASU 2015-02 initially were applied.

Pronouncement Affects Effective Date and Transition

ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory

All entities. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, earlier adoption should be in the first interim period if an entity issues interim financial statements.

The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.

The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable.

ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities

All not-for-profit entities.

The amendments are effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application of the amendments is permitted.

Pronouncement Affects Effective Date and Transition

ASU 2016-13, Measurement of Credit Losses on Financial Instruments

All entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income.

For public business entities (PBE) that are Securities and Exchange Commission (SEC) filers, the new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (for a calendar-year entity, it would be effective January 1, 2020).

For PBEs that are not SEC filers, the new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

For all other organizations, the new standard is effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.

Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

ASU 2016-12, Narrow-Scope Improvements and Practical Expedients

All entities See the Effective Date and Transition of ASU 2014-09, below.

ASU 2016-11, 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)

None. None.

ASU 2016-10, Identifying Performance Obligations and Licensing

All entities See the Effective Date and Transition of ASU 2014-09, below.

ASU 2016-09, Improvements to Employee Share-Based Payment Accounting

All entities that issue share-based payment awards to their employees.

For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

Early adoption is permitted for any organization in any interim or annual period.

Pronouncement Affects Effective Date and Transition

ASU 2016-08, Principal versus Agent Considerations

(Reporting Revenue Gross versus Net)

All entities. See the Effective Date and Transition of ASU 2014-09, below.

ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting

Entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.

ASU 2016-06, Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force)

Entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options.

For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.

For entities other than public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.

An entity should apply the amendments on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Pronouncement Affects Effective Date and Transition

ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)

Entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument.

For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.

For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.

An entity has an option to apply the amendments on either a prospective basis or a modified retrospective basis.

Early adoption is permitted, including adoption in an interim period.

ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (a consensus of the Emerging Issues Task Force)

Entities that offer certain prepaid stored-value products.

For public business entities, NFPs that have issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an OTC market, or an employee benefit plan that files financial statements with the SEC, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

The amendments should be applied either using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective or retrospectively to each period presented.

Earlier application is permitted, including adoption in an interim period.

Pronouncement Affects Effective Date and Transition

ASU 2016-03, Effective Date and Transition Guidance (a consensus of the Private Company Council)

All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans.

The amendments are effective immediately.

ASU 2016-02, Leases All lessee and lessor entities.

For public business entities, NFPs that have issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an OTC market, or an employee benefit plan that files financial statements with the SEC, the amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early application of the amendments is permitted for all entities.

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities

Entities that hold financial assets or owe financial liabilities.

For public companies the amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

For private companies, not-for-profit organizations, and employee benefit plans, the standard becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.

ASU 2015-17, Balance Sheet Classification of Deferred Taxes

Entities that have deferred tax assets and/or deferred tax liabilities.

For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

For all other entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

Pronouncement Affects Effective Date and Transition

ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments

Entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. All other entities are required to apply the new requirements for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.

All entities are required to apply the amendments prospectively to adjustments to provisional amounts that occur after the effective date, with earlier application permitted for financial statements that have not been issued.

ASU 2015-14, Revenue From Contracts With Customers (ASC 606): Deferral of the Effective Date

All entities. See the Effective Date and Transition of ASU 2014-09, below.

ASU 2015-11, Simplifying the Measurement of Inventory

Entities that have inventory.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.

ASU 2015-09, Disclosures about Short-Duration Contracts

Insurance entities that issue short-duration contracts as defined in FASB ASC 944, Financial Services—Insurance.

For public business entities, the amendments are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. For all other entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within annual periods beginning after December 15, 2017.

ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement

All entities. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. For all other entities, the amendments will be effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. Early adoption is permitted for all entities.

Pronouncement Affects Effective Date and Transition

ASU 2015-04, Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets

All entities. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Earlier application is permitted.

ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs

All entities. For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued.

ASU 2015-02, Amendments to the Consolidation Analysis

All entities. Effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

A reporting entity may apply the amendments using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively.

ASU 2014-18, Accounting for Identifiable Intangible Assets in a Business Combination—a consensus of the Private Company Council

All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans.

Effective prospectively to the first in-scope transaction after the adoption of the accounting alternative.

Pronouncement Affects Effective Date and Transition

ASU 2014-16, 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

All entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.

Effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Entities should apply the guidance on a modified retrospective basis (cumulative-effect retained earnings adjustment as of the beginning of the year of adoption) to existing hybrid instruments issued in the form of a share as of the beginning of the fiscal year for which this ASU is effective. Retrospective application is permitted to all relevant prior periods.

ASU 2014-15, Disclosure of Uncertainties About and an Entity’s Ability to Continue as a Going Concern

All entities. Effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

ASU 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity—a Consensus of the Emerging Issues Task Force

A reporting entity that is required to consolidate a collateralized financing entity.

Effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2015. For all other entities, the amendments are effective for annual periods ending after December 15, 2016, and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of an annual period.

ASU 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation

All entities. Except for the amendments to ASC 810, the guidance is effective for public business entities for reporting periods (including interim periods) beginning after December 15, 2014. For other entities, the amendments are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. The amendments to ASC 810 are effective one year later for public business entities and two years later for other entities. The guidance should be applied retrospectively, except for the clarification to ASC 275, which applied prospectively.

Early adoption of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued.

Pronouncement Affects Effective Date and Transition

ASU 2014-09, Revenue from Contracts with Customers

All entities. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early application is permitted only as of annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016.

For all other entities, the ASU is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the ASU early as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in the ASU early as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in the ASU.

An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying guidance at the date of initial application.

GASB Implementation Dates

Pronouncement Affects Effective Date and Transition

Statement 86, Certain Debt Extinguishment Issues

Governmental entities. Effective for reporting periods beginning after June 15, 2017. Earlier application is encouraged.

Statement 85, Omnibus 2017

Governmental entities. Effective for reporting periods beginning after June 15, 2017. Earlier application is encouraged.

Statement 84, Fiduciary Activities

Governmental entities. Effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged.

Statement 83, Certain Asset Retirement Obligations

Governmental entities. Effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.

Pronouncement Affects Effective Date and Transition

Statement 82, Pension Issues

Governmental entities. Effective for reporting periods beginning after June 15, 2016, except for the requirements for the selection of assumptions in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Earlier application is encouraged.

Statement 81, Irrevocable Split-Interest Agreements

Governmental entities. Effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. Earlier application is encouraged.

Statement 80, Blending Requirements for Certain Component Units—an amendment of GASB Statement No. 14

Governmental entities. Effective for reporting periods beginning after June 15, 2016. Earlier application is encouraged.

Statement 79, Certain External Investment Pools and Pool Participants

Governmental entities. Effective for reporting periods beginning after June 15, 2015, except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.

Statement 78, Pensions Provided Through Certain Multiple-Employer Defined Benefit Pension Plans

Governmental entities. Effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.

Statement 77, Tax Abatement Disclosures

Governmental entities. Effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.

Statement 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

Governmental entities. Effective for reporting periods beginning after June 15, 2015. Earlier application is encouraged.

Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Governmental entities. Effective for fiscal years beginning after June 15, 2017. Early adoption is encouraged.

Pronouncement Affects Effective Date and Transition

Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans

Governmental entities. Effective for financial statements for periods beginning after June 15, 2016. Early adoption is encouraged.

Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68

Governmental entities. Effective for fiscal years beginning after June 15, 2015—except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for financial statements for fiscal years beginning after June 15, 2016. Early adoption is encouraged.

Statement 72, Fair Value Measurement and Application

Governmental entities. Effective for financial statements for periods beginning after June 15, 2015. Early adoption is encouraged.

APPENDIX B

Illustrative Disclosures for Recently Issued Accounting Pronouncements

For the Quarter Ended Setember 30, 2017

The illustrative disclosures below are presented in plain English. Please review each disclosure for its applicability to your organization and the need for disclosure in your organization’s financial statements.

ASU 2014-09 ― Applicable to all:

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. This guidance also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The guidance will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2014-10 ― Applicable to development stage entities:

In June 2014, the FASB issued guidance which eliminates the concept of a development stage entity. Accordingly, the incremental reporting requirements for a development stage entity, including inception-to-date information, will no longer apply. The amendments were effective for the Company for [reporting periods beginning after December 15, 2014, except for certain consolidation requirements which are effective one year later-public business entities] [annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015, except for certain consolidation requirements which are effective two years later-all other entities], with early implementation of the amendments permitted. The Company applied the guidance using a retrospective approach, except for certain disclosure requirements which will be applied prospectively. These amendments did not have a material effect on its financial statements.

ASU 2014-15 ― Applicable to all:

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments will be effective for the

Company for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2014-16 ― Applicable to companies with hybrid financial instruments:

In November 2014, the FASB issued guidance for determining whether embedded features need to be accounted for separately from their host shares. The new guidance requires companies to consider all terms and features, including the embedded feature(s) being evaluated for separate recognition, when determining whether a host contract is more akin to debt or equity; no single term or feature should be considered determinative regarding the nature of the host contract. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016-all other entities], with early adoption, including adoption in an interim period, permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2014-18 ― Applicable to private companies that elect to not recognize certain intangible assets in a business combination:

In December 2014, the FASB amended the Business Combinations topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to not recognize separately from goodwill (1) customer-related intangible assets that are not capable of being sold or licensed independently from the other assets of the business and (2) noncompetition agreements. This alternative generally will result in recognizing fewer intangible assets in a business combination and, correspondingly, more goodwill. The alternative is applied on a prospective basis. In addition, when this alternative is elected, the Company also is required to adopt the alternative accounting related to goodwill which requires that goodwill be amortized on a straight-line basis over a period of ten years or over a shorter period if the Company demonstrates that another useful life is more appropriate. The amendments will be effective for the Company upon the occurrence of the first transaction within the scope of this accounting alternative in fiscal years beginning after December 15, 2015, and the effective date of adoption depends on the timing of that first in-scope transaction. If the first in-scope transaction occurs in the first fiscal year beginning after December 15, 2015, the elective adoption will be effective for that fiscal year’s annual financial reporting and all interim and annual periods thereafter. If the first in-scope transaction occurs in fiscal years beginning after December 15, 2016, the elective adoption will be effective in the interim period that includes the date of that first in-scope transaction and subsequent interim and annual periods thereafter. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-02 ― Applicable to all:

In February 2015, the FASB issued guidance which amends the consolidation requirements and

significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous consolidation conclusions. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted (including during an interim period), provided that the guidance is applied as of the beginning of the annual period containing the adoption date. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-03 ― Applicable to entities with debt issuance costs:

In April 2015, the FASB issued guidance which changes the presentation of debt issuance costs. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016-all other entities], with early adoption permitted for financial statements that have not been previously issued. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-04 ― Applicable to entities with defined benefit pension plans:

In April 2015, the FASB issued guidance which provides a practical expedient that permits the Company to measure defined benefit plan assets and obligations using the month-end that is closest to the Company’s fiscal year-end. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-05 ― Applicable to entities with cloud computing arrangements:

In April 2015, the FASB issued guidance which provides guidance to customers about whether a cloud computing arrangement includes a software license. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-09 ― Applicable to insurance entities that issue short-duration contracts:

In May 2015, the FASB issued guidance which requires insurance entities to disclose for annual reporting periods certain information about the liability for unpaid claims and claim adjustment expenses. The amendments will be effective for [fiscal years beginning after December 15, 2015 and interim periods beginning after December 15, 2016-public business entities] [fiscal years beginning after December 15,

2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-11 ― Applicable to entities that have inventory:

In July 2015, the FASB issued amendments to the Inventory topic of the Accounting Standards Codification to require inventory other than inventory measured at LIFO or retail methods to be measured at the lower of cost and net realizable value. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory, there are no other substantive changes to the guidance on measurement of inventory. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-14 ― Applicable to all:

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-16 ― Applicable to all entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete:

In September 2015, the FASB amended the Business Combinations topic of the Accounting Standards Codification to simplify the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted for financial statements that have not been issued. All entities are required to apply the amendments prospectively to adjustments to provisional amounts that occur after the effective date. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-17 ― Applicable to entities that have deferred tax assets and/or deferred tax liabilities:

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for [financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods-public business entities] [financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018-all other entities], with early adoption permitted as of the beginning of an interim or annual reporting period. The Company will apply the guidance [prospectively] [retrospectively]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-01 ― Applicable to entities that hold financial assets or owe financial liabilities:

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for [fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities, including not-for-profit organizations and employee benefit plans] The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-02 ― Applicable to lessee and lessor entities:

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to require all leases with lease terms over 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. The amendments will be effective for [fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2016-03 ― Applicable to private companies:

In March 2016, the FASB amended several topics of the Accounting Standards Codification to make the guidance in all private company accounting alternatives effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a preferability assessment the first time they elect the private company accounting alternatives. The amendments were effective immediately. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-04 ― Applicable to entities that offer certain prepaid stored-value products:

In March 2016, the FASB amended the Liabilities topic of the Accounting Standards Codification to address the current and potential future diversity in practice related to the derecognition of a prepaid stored-value product liability. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.-public business entities] [financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company will apply the guidance [using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective] [retrospectively] to each period presented. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-05 ― Applicable to entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument:

In March 2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.-public companies] [financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entities] Early adoption is permitted. The Company will apply the guidance [using a modified retrospective transition] [prospectively] to each period presented. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-06 ― Applicable to entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options:

In March 2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify the requirements for assessing whether contingent call (put) options that can

accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.-public business entities] [financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entities] Early adoption is permitted. The Company will apply the guidance using a modified retrospective transition to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-07 ― Applicable to entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence:

In March 2016, the FASB amended the Investments—Equity Method and Joint Ventures topic of the Accounting Standards Codification to eliminate the requirement to retroactively adopt the equity method of accounting. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company will apply the guidance prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. The Company does not expect these amendments to have a material effect on its financial statements

ASU 2016-08 ― Applicable to all:

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-09 ― Applicable to all:

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value.

The amendments will be effective for the Company for [annual periods beginning after December 15, 2016 and interim periods within those annual periods.-public business entities] [annual periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2018.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-10 ― Applicable to all:

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-12 ― Applicable to all:

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-13 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The guidance requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019.-SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [annual periods beginning after December 15, 2020, and interim periods within annual reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2016-14 ― Applicable to all not-for-profit entities:

In August 2016, the FASB issued guidance to make targeted improvements to the not-for-profit financial reporting model, including changes in how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Organization is currently evaluating the effect that implementation of the new standard will have on its financial statements.

ASU 2016-15 ― Applicable to all:

In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-16 ― Applicable to all:

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-17 ― Applicable to all:

In October 2016, the FASB amended the Consolidation topic of the Accounting Standards Codification to revise the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2016 including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-18 ― Applicable to all:

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-19 ― Applicable to all:

In December 2016, the FASB issued amendments to clarify the Accounting Standards Codification, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-20 ― Applicable to all:

In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-01 ― Applicable to all:

In January 2017, the FASB issued guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December

15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-02 ― Applicable to all not-for-profit entities:

In January 2017, the FASB amended the Not-for-Profit Entities Topic of the Accounting Standards Codification to clarify consolidation guidance for not-for-profit entities. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. The Organization is currently evaluating the effect that implementation of the new standard will have on its financial statements.

ASU 2017-03 ― Applicable to SEC filers:

In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

ASU 2017-04 ― Applicable to all:

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for [reporting periods beginning after December 15, 2019.-public business entities that are SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-05 ― Applicable to all:

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on

nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-06 ― Applicable to employee benefit plans with a master trust:

In February 2017, the FASB amended the guidance related to employee benefit plan master trust reporting. The new guidance provides for presentation within the plan’s financial statements of its interest in a master trust as a single line item; disclosure of the master trust’s investments by general type as well as by the dollar amount of the plan’s interest in each type; disclosure of the master trust’s other assets and liabilities and the balances related to the plan; and elimination of required disclosures for Section 401(h) accounts that are already provided by the associated defined benefit plan. The amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Plan does not expect these amendments to have a material effect on its financial statements.

ASU 2017-07 ― Applicable to entities that offer defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under ASC 715:

In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits Topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-08 ― Applicable to entities that hold investments in callable debt securities held at a premium

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-09 ― Applicable to entities with stock compensation plans

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-10 ― Applicable to entities with service concession arrangements

In May 2017, the FASB amended the requirements in the Service Concession Arrangements Topic of the Accounting Standards Codification to clarify how an operating entity determines the customer of the operation services for service concession arrangements. The amendments will be effective for the Company for {[reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entities] -entities that have not adopted ASU 2014-09} {[fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.-public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and an employee benefit plan that files or furnishes financial statements with or to the SEC] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities]-entities that have adopted ASU 2014-09} The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-11 ― Applicable to entities that issue financial instruments that include down round features

In July 2017, the FASB amended the requirements in the Earnings per Share, Distinguishing Liabilities from Equity, and Derivatives and Hedging Topics of the Accounting Standards Codification to address the complexity of accounting for certain financial instruments with down round features. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-12 ― Applicable to entities that elect to apply hedge accounting

In August 2017, the FASB amended the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The

amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

Applicable to all:

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.