The document provides an overview and summary of several accounting standards updates (ASUs) issued by the FASB in 2014 that are relevant for private companies and other entities. It discusses the ASUs on simplifying goodwill accounting, interest rate swap accounting, applying variable interest entity guidance to common control leasing arrangements, and other topics. The ASUs aim to reduce costs and complexity for private companies while still providing useful information to financial statement users. The document outlines the objectives, who is affected, key provisions, differences from previous guidance, and effective dates of each ASU.

1. A&A Update
Jami Blake, CPA
Partner, Cohen & Company

2. Objectives
• Participants will obtain a general
understanding of:
– Standards issued in 2014 relating to private
companies:
• Accounting for Goodwill
• Accounting for Interest Rate Swaps
• Applying Variable Interest Entities Guidance to
Common Control Leasing Arrangements

3. Objectives (Continued)
• Participants will obtain an overview of:
– Proposals currently being considered by the PCC
• Accounting for Identifiable Intangible Assets in
a Business Combination
– Standards issued in 2014 relating to all entities:
• Financial Reporting Requirements of
Development Stage Entities
• Revenue Recognition
– Other changes on the immediate horizon

4. ASU 2014-02: Intangibles – Goodwill and Other
(Topic 350)
• Issued in January 2014 – Simplified Goodwill
Accounting
• Why did the FASB issue this Standards update?
• Who does the update apply to?
• What are the main provisions?
• How does this compare to current U.S. GAAP?
• Why is it an improvement?
• When is it effective?

5. Why Issued?
• Feedback from private company stakeholders,
users of private company f/s, and preparers
and auditors regarding current accounting for
goodwill:
– Benefits of current accounting do not justify costs
– Provides limited useful information in analyzing an
entity’s financial position and operating
performance
– Goodwill impairment test costly and complex

6. Who is Affected?
• Applicable to all entities except:
– Public businesses
– Not-for-profit entities
– Employee benefit plans
• Applicable to:
– Goodwill existing at the beginning of the annual
period in which it is elected
– New goodwill recognized after the beginning of
the annual period of adoption

7. What are the main provisions?
• Gives an alternative to amortize goodwill on a
straight-line basis over 10 years (or less if
demonstrate another useful life is more
appropriate)
• Make an accounting policy election to test
goodwill impairment at either the entity level or
the reporting unit level
• Goodwill should be tested for impairment upon
occurrence of a triggering event (can first assess
qualitative factors)

8. How is this different?
Alternative
• Amortize over 10 years
• Impairment tested only upon
occurrence of a triggering
event
• One step impairment test
• Test impairment at entity level
or reporting unit level
• Disclosure of gross carrying
amounts, A/A, amortization
expense, and accumulated
impairment loss
Existing U.S. GAAP
• No amortization
• Impairment tested at least
annually (or more
frequently)
• Two step impairment test
• Must test impairment at the
reporting unit level
• Tabular reconciliation of
changes in goodwill
disclosed

9. Improvement?
• Cost savings in not having to fair value
goodwill each year
• Expect no loss of relevant information for
users of f/s

10. When is this effective?
• Applied prospectively to goodwill existing as
of the beginning of the period of adoption
• For new goodwill recognized in annual periods
beginning after 12/15/2014 (2015 calendar
year) and interim periods within annual
periods beginning after 12/15/2015
• Early application is permitted for any period
the f/s have not yet been made available for
issuance

11. ASU 2014-03: Derivatives and Hedging
(Topic 815)
• Issued in January 2014: Simplified Hedge
Accounting Approach
• Why did the FASB issue this Standards update?
• Who does the update apply to?
• What are the main provisions?
• How does this compare to current U.S. GAAP?
• Why is it an improvement?
• When is it effective?

12. Why Issued?
• Feedback from private company stakeholders
regarding current accounting for interest rate
swaps:
– Hedge accounting is difficult to understand and apply
– Private companies lack the expertise to comply with
requirements to qualify for hedge accounting
– Question the relevance and costs associated with
determining and presenting the fair value of a swap
entered into in order to convert a variable rate
borrowing to a fixed rate borrowing

13. Who is Affected?
• Applicable to all entities except:
– Public businesses
– Not-for-profit entities
– Employee benefit plans
– Financial institutions (banks, savings and loan
associations, savings banks, credit unions, finance
companies, and insurance entities)

14. What are the main provisions?
• Allow use of simplified hedge accounting
approach for swaps that are entered into for
the purpose of economically converting a
variable-rate borrowing into a fixed-rate
borrowing
• Option to measure designated swap at
settlement value instead of fair value

15. What are the main provisions?
• Must meet following criteria:
– Swap and borrowing based on the same index and reset
period
– Terms of swap are “typical” (plain vanilla)
– Re-pricing and settlement dates for swap and borrowing
are the same or differ by no more than a few days
– Swap’s FV at inception is at or near zero
– The notional amount of the swap matches the principal
amount of the borrowing being hedged (amount being
hedged can be less than total principal amount being
borrowed)
– All interest payments occurring on the borrowing during
the term of the swap are designated as hedged

16. What are the main provisions?
• Can elect this approach to any qualifying swap, whether
existing at the date of adoption or entered into after that
date
• Disclosure requirements under Topics 815 and 820
continue to apply
• Exempt from Topic 825 disclosures if all the following
conditions are met:
– Entity is a nonpublic entity
– Total assets of the entity are less than $100M on the date of the
financial statements
– The entity has no instrument that, in whole or in part, is
accounted for as a derivative instrument under Topic 815 other
than commitments related to the origination of mortgage loans
to be held for sale during the reporting period.

17. How is this different?
Alternative
• Practical expedient for
measurement of the
swap (settlement value)
• Certain disclosures
under ASC 825 are not
required as is not
considered a derivative
instrument under this
alternative
Existing U.S. GAAP
• Must measure swap at
FV
• Must comply with
disclosures in ASC 825

18. Improvement?
• Continue to provide useful information to
users
• Provide reduction in cost and complexity in
accounting for such swaps by preparers
• Should alleviate some cost and complexity
concerns with regard to estimating fair value

19. When is this effective?
• Annual periods beginning after 12/15/2014 (2015
calendar year) and interim periods within annual
periods beginning after 12/15/2015
• Early application is permitted
• One of two approaches may be used:
– Modified retrospective approach (adjustments made to
opening balances of the current period presented to
reflect the effects of applying from the date the swap was
entered into)
– Full retrospective approach (adjustments made to opening
balances of the earliest period presented to reflect the
effects of applying from the date the swap was entered
into)

20. ASU 2014-07: Consolidation
(Topic 810)
• Issued in March 2014 – Applying VIE Guidance to
Common Control Leasing Arrangements
• Why did the FASB issue this Standards update?
• Who does the update apply to?
• What are the main provisions?
• How does this compare to current U.S. GAAP?
• Why is it an improvement?
• When is it effective?

21. Why Issued?
• Feedback from private company stakeholders and
users of private company f/s regarding current
accounting for lessor entities under common
control:
– Benefits of applying VIE guidance do not justify the
related costs
– Provides limited useful information to users who are
focused on cash flow and tangible worth of the stand-
alone lessee entity and distorts the f/s as those assets
are not available to satisfy the obligations of the
lessee entity

22. Who is Affected?
• Applicable to all entities except:
– Public businesses
– Not-for-profit entities
– Employee benefit plans
• Accounting policy election that, when elected,
is applicable to all current and future lessor
entities under common control that meet the
criteria for applying this approach

23. What are the main provisions?
• Permit a private company lessee to elect an alternative
not to apply VIE guidance to a lessor entity if:
– The entities are under common control,
– The private company lessee has a lease arrangement with
the lessor entity,
– Substantially all of the activities between the two entities
are related to leasing activities, and
– If the private company lessee explicitly guarantees or
provides collateral for any obligation of the lessor entity
related to the asset leased by the private company - the
principal amount of that obligation at inception of such
arrangement cannot exceed the value of the asset leased.

24. What are the main provisions?
• No VIE disclosures would be required about the
lessor entity
• Disclosures needed:
– Amount and key terms of liabilities recognized by the
lessor entity that expose the private company lessee
to providing financial support to the lessor entity, and
– A qualitative description of circumstances not
recognized in the f/s of the lessor entity that expose
the private company lessee to providing financial
support to the lessor entity

25. How is this different?
Alternative
• No application of VIE
model if certain
conditions exist – no
consolidation when this
determination is made
(still must consider
consolidation under
voting interest model)
Existing U.S. GAAP
• Requires consolidation
of an entity which the
reporting entity has a
controlling financial
interest (voting interest
or VIE model)

26. Improvement?
• Potential to improve financial reporting for
the users of private company f/s
• Potential to reduce the cost and complexity
associated with financial reporting

27. When is this effective?
• Applied retrospectively to all periods
presented
• Annual periods beginning after 12/15/2014
(2015 calendar year) and interim periods
within annual periods beginning after
12/15/2015
• Early application is permitted for any period
the f/s have not yet been made available for
issuance

28. PCC Issue No 13-01A: Accounting for Identifiable
Intangible Assets in a Business Combination
• Most recent discussions end of April 2014 (no final
decision reached)
• Four alternatives for recognition of intangible assets in
a business combination are being discussed (regarding
not separately identifying certain intangibles)
• PCC expected to resume discussions at July 2014
meeting
– Expected to consider expanding scope to intangible assets
acquired in an asset acquisition (to avoid differences
between that and assets acquired in a business
combination)

29. ASU 2014-10: Development Stage
Entities (Topic 915)
• Issued in June 2014
• Who does the update apply to?
• What are the main provisions?
• Why is it an improvement?
• When is it effective?

30. Who is Affected?
• Entities considered development stage
entities under U.S. GAAP
– Planned principal operations have not
commenced or have commenced, but there has
been no significant revenue
• Entities with consolidation decisions due to an
interest in an entity that is a development
stage entity

31. What are the main provisions?
• Removes definition of development stage entity
from glossary of ASC, removing distinction
between them and other reporting entities
• Remove all incremental financial reporting
requirements from U.S. GAAP for development
stage entities
• Eliminate an exception provided to development
stage entities in Topic 810 (Consolidation) for
determining whether an entity is a VIE on basis of
amount of equity investment at risk

32. Improvement?
• Reduce data maintenance and audit costs for
presentation of inception-to-date information
in the statements of income, cash flows, and
shareholder equity
• Provide consistent consolidation analyses
among reporting entities

33. When is this effective?
• For public entities: Annual periods beginning
after 12/15/2014 (2015 calendar year) and
interim periods therein
• Other entities: Annual periods beginning after
12/15/2014 (2015 calendar year) and interim
periods beginning after 12/15/2015
• Early application is permitted for any period the
f/s have not yet been issued or made available for
issuance
• Effective dates one year later for elimination of
the exception in 810-10-15-16

34. ASU 2014-09: Revenue from Contracts
with Customers (Topic 606)
• Revenue Recognition
– Issued May 2014
– Effective date
• Public companies – annual reporting periods beginning
after 12/15/2016, including interim periods within that
period
• Non public companies - annual reporting periods
beginning after 12/15/2017, including interim periods
within that period

35. Change on the Immediate Horizon
• Going Concern
– Look-forward period to assess information about
conditions and events will be one year from the
date the financial statements are issued (or
available to be issued – private companies) rather
than from the f/s date
– Expected to be effective prospectively for annual
periods beginning after 12/15/2015, and in
interim periods thereafter

36. Questions?