FASB Update December 2013

1. FASB Update December 2013

2. What is going on? • Interesting last few years • 2010 29 ASUs issued • 2011-2013 30 ASUs issued • Changes have gotten bottled up • Big three projects • Getting closer to the jam being removed

3. 2013 ASUs • 01 – Offsetting Assets & Liabilities • 02 – Reclassifications out of Other Comprehensive Income • 03 – Nonpublic disclosures for financial instruments • 04 – Joint and several liability arrangements (EITF) • 05 – Foreign currency issue (EITF)

4. 2013 ASUs • 06 – NFP services received issue (EITF) • 07 – Liquidation basis • 08 – Financial services – investment company issues • 09 – Deferral of certain disclosure requirements of ASU 2011-04 • 10 – Derivative and Hedging issue (EITF) • 11 – Unrecognized tax benefit reporting (EITF)

5. Revenue Recognition • Final Draft expected for Board consideration this month • Expected to pass • Effective years beginning after 12/15/16 • Five step process • Identify contracts with customers • Identify separate performance obligations • Determine transaction price • Allocate price to obligations • Recognize revenue as obligations satisfied

6. Costs of Implementation • FASB staff identified specific anticipated cost increases associated with: • Construction & production type contracts • Time value adjustments to transaction prices • Bundled telecommunication contracts • The revenue constraint • Licenses of intellectual property • Transition requirements

7. Areas Requiring Judgment • Who is a customer • Collectibility issues • Separating performance obligations • Significant revenue reversal • Time value of money • Recognition over time vs. point in time

8. Leases • Who knows? • Type A vs. Type B dilemma • Seemingly no support • Is doing nothing an option

9. Financial Instruments • Three stage project • Classification & Measurement • Impairment • Hedging • Classification & Measurement ASU and Impairment ASU expected in first half of 2014

10. Classification & Measurement • Classification of financial asset will be based on its cash flow characteristics and the entity’s business model for managing the asset • Three possible classifications • Amortized cost • Fair value – net income • Fair value – other comprehensive income • Changes to fair value option

11. Impairment • Proposes a current expected credit loss model that would apply to all impairments of financial instruments • Model would reflect management’s current estimate of the contractual cash flows the entity does not expect to collect

12. Discontinued Operations • Big change is to the definition of “component of the entity” • Expanded disclosures for discontinued operations • Balance sheet effects • Expected to be completed in early 2014 and implemented for public companies in 2015 and non-public companies in 2016

13. Going Concern Disclosures • Provides guidance on when and how entities should disclose going concern uncertainties in financial statements • Must assess ability to meet obligations due within 24 months to determine if disclosures are necessary • Plan calls for review of comments in first quarter and proceed from there

14. PCC Proposals • Accounting for identifiable intangible assets acquired in a business combination • Accounting for goodwill • Accounting for receive-variable, pay-fixed interest rate swaps

15. Other Projects • Definition of NonPublic entity • Disclosure Framework • Development Stage Enterprises • NFP Financial Statements