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FASB Update

FASB Update. Presented by: Ken Douglas, CPA, Partner Health Care and Assurance Services. ©2011 Bruner-Cox LLP All rights reserved Proprietary and Confidential. Update on New FASB Accounting Standards in 2010 and 2011 Status Update on Current Projects and Proposed Standards. Agenda.

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FASB Update

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  1. FASB Update Presented by: Ken Douglas, CPA, Partner Health Care and Assurance Services ©2011 Bruner-Cox LLP All rights reserved Proprietary and Confidential

  2. Update on New FASB Accounting Standards in 2010 and 2011 Status Update on Current Projects and Proposed Standards Agenda

  3. FASB Accounting Standards Updates • Issued to make amendments to the FASB Codification • Issued by year and number sequence • New guidance no longer issued in the form of FASB Statements, FASB Staff Positions or EITF consensus

  4. FASB Accounting Standards Updates • ASU 2010-01: Accounting for Distributions to Shareholders with Components of Stock and Cash • ASU 2010-02: Accounting and Reporting for Decreases in Ownership of a Subsidiary - A Scope Clarification • ASU 2010-03: Oil and Gas Reserve Estimation and Disclosures

  5. FASB Accounting Standards Updates • ASU 2010-04: Technical Corrections to SEC Paragraphs • ASU 2010-05: Escrowed Share Arrangements and the Presumption of Compensation • ASU 2010-06: Improving Disclosures About Fair Value Measurements

  6. ASU 2010-06 Topic 820 • Requires new disclosures and clarifies existing disclosures regarding fair value • Disclose transfers in and out of Level 1 and Level 2 and reasons for transfers • Additional Level 3 disclosures regarding purchases, sales, issuances and settlements in the roll forward

  7. ASU 2010-06 Topic 820 • Reporting entity should provide disclosures about valuation techniques • Effective for interim and annual reporting periods beginning after December 15, 2009 except Level 3 roll forward activity is effective for fiscal years beginning after December 15, 2010

  8. FASB Accounting Standards Updates • ASU 2010-07: Not-for-Profit Entities: Mergers and Acquisitions • ASU 2010-08: Technical Corrections to Various Topics • ASU 2010-09: Subsequent Events:Amendments to Certain Recognition and Disclosure Requirements • ASU 2010-10: Amendments for Certain Investment Funds

  9. ASU 2010-07 Topic 958: NFP Mergers • To include in the Codification the requirements of FASB Statement No. 164 • Determines if combination is a merger or an acquisition • Amends SFAS No. 142, Goodwill and Other Intangible Assets, to make it fully applicable to not-for-profit

  10. ASU 2010-07 Topic 958: NFP Mergers • Applies the carryover method for merger accounting • Determines which entity is the acquirer • Determines necessary disclosures • FASB 164 was applicable for mergers and acquisitions with a date on or after the beginning of an initial reporting period beginning on or after December 15, 2009

  11. FASB Accounting Standards Updates • ASU 2010-11: Scope Exception Related to Embedded Credit Derivatives • ASU 2010-12: Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts • ASU 2010-13: Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades

  12. ASU 2010-12 Topic 740 • Allows SEC registrants to consider the two separate health care Acts in 2010 can be considered together for accounting purposes. -Health Care and Education Reconciliation Act of 2010 and the -Patient Protection and Affordable Care Act “The Acts”

  13. FASB Accounting Standards Updates • ASU 2010-14: Oil & Gas: Amendments to Paragraph 932-10-S99-1 • ASU 2010-15: How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments • ASU 2010-16: Accruals for Casino Jackpot Liabilities

  14. FASB Accounting Standards Updates • ASU 2010-17: Milestone Method of Revenue Recognition • ASU 2010-18: Effect of a Loan Modification When the Loan is Part of a Pool that Is Accounted for as a Single Asset • ASU 2010-19: Foreign Currency Issues

  15. FASB Accounting Standards Updates • ASU 2010-20: Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses • ASU 2010-21: Accounting for Technical Amendments to Various SEC Rules and Schedules • ASU 2010-22: Accounting for Various Topics -Business Combinations and Consolidations

  16. FASB Accounting Standards Updates • ASU 2010-23: Measuring Charity Care for Disclosure • ASU 2010-24: Presentation of Insurance Claims and Related Insurance Recoveries • ASU 2010-25: Reporting Loans to Participants by Defined Contribution Pension Plans

  17. 2010-23 Topic 954 • Intended to reduce diversity regarding measurement basis used in charity care disclosures • Requires cost to be used as the measurement basis • Cost includes direct and indirect costs • Requires disclosure of method used to identify such costs • Effective for fiscal years beginning after December 15, 2010 and should be applied retroactively to all periods presented

  18. 2010-24 Topic 954 • Health care entities should not net insurance recoveries against related claim liabilities • The claim liability must be determined without consideration of insurance recoveries • Effective for fiscal years and interim periods beginning after December 15, 2010 • Cumulative-effect adjustment to opening retained earnings but retrospective application is permitted

  19. 2010-25 Topic 962 • Applies to defined contribution pension plans that allow participant loans • Loans now considered notes receivables not plan investments • Valued at their unpaid principal balance plus accrued but unpaid interest • Effective for fiscal years ending after December 15, 2010 and should be applied retroactively to all periods presented

  20. FASB Accounting Standards Updates • ASU 2010-26: Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts • ASU 2010-27: Fees Paid to the Federal Government by Pharmaceutical Manufacturers • ASU 2010-28: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts

  21. 2010-27 Topic 720 • Addresses how pharmaceutical manufacturers should recognize and classify fees mandated by The Acts • Addresses that a liability for the fees should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized over the year • Effective for calendar years beginning after December 31, 2010, when the fee initially becomes effective

  22. FASB Accounting Standards Updates • ASU 2010-29:Disclosure of Supplementary Pro Forma Information for Business Combinations

  23. ASU Updates in 2011

  24. FASB Accounting Standards Updates in 2011 • ASU 2011-01: Deferral of Effective Date of Disclosures about Troubled Debt Restructuring in Update No. 2010-20 • ASU 2011-02: A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring • ASU 2011-03: Reconsideration of Effective Control for Repurchase Agreements

  25. Current Projects/Issues • Revenue Recognition • Financial Instruments • Goodwill • Health Care Bad Debt presentation • Leases • IFRS Update • Other Topics

  26. Revenue Recognition • Joint project of the FASB and IASB • To clarify the revenue principles and develop a common revenue standard • ED issued June 2010

  27. Revenue Recognition • Common standard to • Remove inconsistencies in existing standards and practices • Provide more robust framework for addressing revenue recognition issues • Improve comparability pf practices across industries and capital markets • Simplify preparation of financial statements by reducing the number of requirements

  28. Revenue Recognition • Final standard expected by end of 2011

  29. Financial Instruments • Project to replace FASB and IASB standards on financial instruments with a common standard • Issued 3 EDs in May, 2010,January 2011 and February 2011, related to hedging • Future plans to meet and reconcile differences

  30. FASB Issues Goodwill Impairment Proposal • Exposure draft of proposed ASU issued April 22, 2011 • Intended to simplify test for goodwill impairment • Qualitative assessment before requiring fair value calculations • Effective for fiscal years beginning after December 15, 2011 • Comments due by June 6, 2011

  31. Emerging Issues Task Force • Issue No. 09-H • “Health Care Entities: Presentation and Disclosure of Net Patient Service Revenue, Provision for Bad Debts and the Allowance for Doubtful Accounts”

  32. Issue No. 09-H • To address the issue of whether collectibility must be reasonably assured prior to a health care entity recognizing revenue • Concerned that bad debts are treated differently than charity care and contractual expenses in the financial statements

  33. Health Care Entities Topic 954 • Proposed standard would have required healthcare entities to provide expanded disclosures for: • Net revenue • Bad debts • Allowance for doubtful account • Changes the presentation of bad debts within statement of operations • HFMA comment letter in February at www.hfma.org FASB 954

  34. Health Care Entities Topic 954 • Comments letters raised concerns on cost to implement and usefulness of additional required disclosures • Based on comment letters the Board has withdrawn their December 1, 2010 decision to ratify the new requirements and will re-expose a new proposal in the future

  35. Leases • FASB and IASB issued a joint ED on August 17, 2010, Leases • Attempt to provide more consistent useful information • Introduced a “right-of-use” approach • Would require a liability for payments and right to use underlying asset on lessee’s balance sheet

  36. Potential ED Lease Changes • No change in new ED to core principle to record all leases • Revisions more in line with existing accounting • Rather than single model looking at classifying leases as a finance lease or other-than-finance lease • Both on balance sheet but different expensing of each type

  37. Leases • Comment period ended December 15, 2010 • Significant criticism of the ED • Deciding whether to re-expose the proposal based on comment letters • Final standard expected in 2011

  38. IFRS Update • FASB and IASB pushed completion of priority projects from June 2011 into 2012 • May impact SEC decision decision which was suppose to be in 2011 • Remaining projects include: • Revenue recognition • Leasing • Financial instruments • Insurance projects

  39. AICPA Health Care Audit Guide • Revised Guide published on AICPA website on April 6, 2011 • Comment period open until June 6, 2011 • First comprehensive revision since 1996 • Incorporates ASC Codification • New Chapters on Derivatives and Municipal Bond Financing

  40. Executive Pay at NFPs • IRS believes establishing and overseeing of executive compensation is the biggest area of noncompliance in exempt organizations • It is a Board responsibility not a consultant or specialist only • Can lead to intermediate sanctions and tax issues

  41. Questions? Ken Douglas, CPA, Partner Health Care and Assurance Services 330.706.6110 ken.douglas@brunercox.com

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