How does the new guidance in FASB ASC 825, Financial Instruments, differ from current GAAP? This course will help you answer that question. We will explain the core principles of the new standards. Understanding the new rules for classifying and measuring financial instruments is essential for proper reporting. The background, purpose and main provisions of the new guidance will be discussed during this webinar. Attendees should have a basic understanding in the application of accounting standards before attending this webinar.

1. #cbizmhmwebinar 1
CBIZ & MHM
Executive Education Series™
Financial Instruments: Preparing for the
New FASB Requirements
Mike Loritz & Christine McAlarney
June 28 and July 21, 2017

2. #cbizmhmwebinar 2
About Us
• Together, CBIZ & MHM are a Top Ten accounting provider
• Offices in most major markets
• Tax, audit and attest and advisory services
• Over 2,900 professionals nationwide
A member of Kreston International
A global network of independent
accounting firms
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that provides audit, review and attest services, and works closely with CBIZ, a business consulting,
tax and financial services provider. CBIZ and MHM are members of Kreston International Limited, a global network of independent accounting firms.

3. #cbizmhmwebinar 3
Before We Get Started…
• To view this webinar in full screen mode, click on view options
in the upper right hand corner.
• Click the Support tab for technical assistance.
• If you have a question during the presentation, please use the
Q&A feature at the bottom of your screen.

4. #cbizmhmwebinar 4
CPE Credit
This webinar is eligible for CPE
credit. To receive credit, you will
need to answer periodic
participation markers
throughout the webinar.
External participants will receive
their CPE certificate via email
immediately following the
webinar.

5. #cbizmhmwebinar 5
Disclaimer
The information in this Executive Education Series
course is a brief summary and may not include all
the details relevant to your situation.
Please contact your service provider to further
discuss the impact on your business.

6. #cbizmhmwebinar 6
Presenters
Mike has 20 years of experience in public accounting with diversified
financial companies and other service based companies, including
banking, broker/dealer, investment companies, and other diversified
companies ranging from audits of public entities in the Fortune 100 to
small private entities.
He is a member of MHM's Professional Standards Group, providing
accounting knowledge leadership in the areas of derivative financial
instruments, financial instruments, share-based compensation, fair
value, revenue recognition and others.
816.945.5611 • mloritz@cbiz.com
MIKE LORITZ, CPA
MHM Shareholder

7. #cbizmhmwebinar 7
Presenters
Located in our Tampa Bay office, Christine has worked extensively in all
aspects of audit, review and compilation engagements, as well as
Securities and Exchange Commission reporting. Her industry experience
includes mortgage service, manufacturing, distribution, software,
biopharmaceutical, insurance, and healthcare.
Christine is a member of MHM's Professional Standards Group where
she spends a dedicated portion of time providing internal consultations
and supporting the Professional Standards Group's thought leadership
and educational activities. Her subject matter expertise is in business
combinations, complex debt and equity arrangements, and financial
instruments.
727.572.1400 • cmcalarney@cbiz.com
CHRISTINE MCALARNEY, CPA
MHM Senior Manager

8. #cbizmhmwebinar 8
Agenda
Overview
02
01
03
04
Key Related Concepts
Amendments to Investments
Amendments to Income Taxes
05 Amendments to Financial Instruments
06 Amendments to Other Comprehensive Income

9. #cbizmhmwebinar 9
BACKGROUND AND OVERVIEW

10. #cbizmhmwebinar 10
Background and Overview
Background of Accounting Standards Update 2016-01:
• May 26, 2010: FASB issued Proposed ASU - Accounting for Financial
Instruments and Revisions to the Accounting for Derivative Instruments and
Hedging Activities - Financial Instruments (Topic 825) and Derivatives and
Hedging (Topic 815)
• Extensive outreach to obtain feedback
• Received 2,810 comment letters and 28 investor questionnaires
• Few stakeholders, including users, supported measurement of virtually all financial
instruments at fair value
• Most stakeholders favored a mixed measurement attribute model and supported
retaining more extensive use of amortized cost measurement for most loans, core
deposits, and most financial liabilities
• February 14, 2013: FASB issued revised Proposed ASU, Financial Instruments –
Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities
• Narrowed down from the original proposed standard
• Resulted in the issuance of proposed consequential amendments to the Codification
on April 12, 2013
• Extensive outreach again - received another 165 comment letters

11. #cbizmhmwebinar 11
Background and Overview
Background of Accounting Standards Update 2016-01:
• Result:
• Financial Instruments and Hedging Amendments and Proposals were
broken down into three major components:
 January 5, 2016 - ASU 2016-01 : Accounting for Financial Instruments –
Recognition and Measurement (Subtopic 825-10)
 June 13, 2016 - ASU 2016-13: Financial Instruments – Credit Loss (Topic 326) -
Measurement of Credit Losses on Financial Instruments
 September 8, 2016 - Exposure Draft: Proposed Accounting Standards Update—
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities
• Did Not Achieve Convergence with IFRS
 FASB decided to make only targeted improvements to GAAP and retain the
current framework for accounting for financial instruments in GAAP after
evaluating the potential costs and benefits of pursuing the changes that would
result in complete convergence with IFRS 9, Financial Instruments.
• Equity method investments and investments that result in
consolidation are not within the scope of this amendment

12. #cbizmhmwebinar 12
ASU 2016-01 Issuance and Effective Dates
ISSUANCE
EFFECTIVE
Recognition and Measurement Amendment
Effective Dates
For Fiscal Years Beginning After:
December 15, 2017 (including interim periods within those fiscal
years) - public business entities that are U.S. Securities and
Exchange Commission (SEC) filers
December 15, 2018 (and interim periods within fiscal years
beginning after December 15, 2019) - For all other entities
December 15, 2017 – Early adoption for all entities that are
not public
CECL & AFS Credit Loss Model Effective Dates
For Periods Beginning After:
December 15, 2019 – public business entities that are
SEC filers
December 15, 2020 – For all other entities*
December 15, 2018 – Early adoption for all entities
January 2016
FASB issues standard on
Recognition & Measurement
(ASU 2016-1).
June 2016
FASB issues standard
on measurement of
credit losses
(ASU 2016-13).
* Effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after
December 15, 2021.
September 2016
FASB issues proposed
standard on Hedging
Activities

13. #cbizmhmwebinar 13
Background and Overview
Early Adoption for ASU 2016-01:
• Except for the early application guidance discussed below,
adoption is not permitted.
• The following can be applied early:
• The instrument-specific credit risk portion of the change in fair
value of a liability reported at fair value (due to the fair value
option election) can be presented separately in other
comprehensive income
• Nonpublic entities can adopt the disclosure guidance in the
General Subsection of ASC 825-10-50
All nonpublic entities may adopt the amendments earlier as of the
fiscal year beginning after December 15, 2017 (rather than the fiscal
year beginning after December 15, 2019, the required effective
date).

14. #cbizmhmwebinar 14
Background and Overview
Transition Guidance for ASU 2016-01:
• General Rule: Amendments should be applied using a
cumulative-effect adjustment to the balance sheet as of the
beginning of the fiscal year of adoption.
• Exception: Amendments related to equity securities without readily
determinable fair values (including disclosure requirements) should be
applied prospectively to equity investments that exist as of the date of
adoption.

15. #cbizmhmwebinar 15
KEY RELATED CONCEPTS

16. #cbizmhmwebinar 16
Key Related Concepts
What is Fair Value?
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Orderly Transaction
•Transaction that assumes
exposure to the market for a
period before the measurement
date
•Allows for marketing activities
that are usual and customary
•Not a forced transaction (i.e.
forced liquidation or distress sale)
Market Participants
•Buyers and sellers in the
principal (or Most
Advantageous ) Market
having all the following
characteristics:
•Independent of each other
(not related parties)
•Knowledgeable
•Willing and able to enter
into a transaction
Most Advantageous
Market
•Market that maximizes the
amount that would be received to
sell the asset or minimizes the
amount that would be paid to
transfer the liability
•Takes into account transaction
costs and transportation costs

17. #cbizmhmwebinar 17
Key Related Concepts
What is Fair Value? - Continued
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Readily Determinable Fair Value
•Equity security that meets any of the following conditions:
•Sales price or bid-and-asked quotations of equity security are available
on a securities exchange registered with the SEC or over-the-counter
market (provided that those are publicly reported by National
Association of Securities Dealers Automated Quotations systems or by
OTC Markets Groups Inc.)
•Traded in a foreign market but on a market of breadth and with a scope
comparable to one of the U.S. markets
•An investment in a mutual fund or in a structure similar to a mutual
fund if the fair value per share (unit) is determined and published and is
current
Entry Price / Exit
Price
•Entry Price - The price paid
to acquire an asset or
received to assume a
liability in an exchange
transaction.
•Exit Price - The price that
would be received to sell
an asset or paid to transfer
a liability.

18. #cbizmhmwebinar 18
Key Related Concepts
Definition of Financial Instrument
ASC Master Glossary defines Financial Instrument:
Cash, evidence of an ownership interest in an entity, or a contract that both:
1. Imposes on one entity a contractual obligation either:
a) To deliver cash or another financial instrument to a second entity
b) To exchange other financial instruments on potentially unfavorable
terms with the second entity
2. Conveys to that second entity a contractual right either:
a) To receive cash or another financial instrument from the first entity
b) To exchange other financial instruments on potentially favorable terms
with the first entity

19. #cbizmhmwebinar 19
Key Related Concepts
What are Financial Assets?
• Cash and Cash Equivalents
• Loans and Receivables
• Investments in
subsidiaries, associates,
and joint ventures
• Investments held by
employee benefit plans
• Employers' assets and
liabilities under employee
benefit plans
Investments in Debt Securities:
• U.S Treasury bonds, notes, and bills
and government agency securities
• Municipal bonds
• Corporate bonds and commercial
paper
• Convertible debt
• Securitized debt instruments
• Interest-only and principal-only strips
• Preferred stock that is mandatorily
redeemable by the issuer or that is
redeemable at the option of the
investor
• Securitized financial assets issued in
equity form that nonetheless
represent a creditor relationship
Investments in Equity Securities:
• Security representing an ownership
(for example, common, preferred, or
other capital stock
• Right to acquire (for example,
warrants, rights, and call options)
• Right to dispose (put options) an
ownership interest in an entity at
fixed or determinable prices

20. #cbizmhmwebinar 20
Key Related Concepts
What are Financial Liabilities?
• Debt financing
• Corporate bonds
• Notes
• Loans
• Mortgages
• Commercial Paper
• Repurchase Agreements
• Securities Lending Arrangements
• Other Pledges of Collateral
• Convertible Debt Instruments

21. #cbizmhmwebinar 21
Key Related Concepts
What is the Fair Value Option?
The “fair value option” permits entities to choose, at specified election dates, to measure eligible financial
assets and financial liabilities at fair value.
Rules: Applied on an instrument basis, once elected it is irrevocable, and applies to the entire instrument (not just specific
portions)
Eligible Items
•A recognized financial asset and
financial liability, with certain specified
exceptions
•A firm commitment that would
otherwise not be recognized at
inception and that only involves
financial instruments
• A written loan commitment
•Certain rights and obligations under an
insurance contract
•A host financial instrument resulting
from the separation of an embedded
nonfinancial derivative instrument
from a nonfinancial hybrid instrument
Items Not Eligible
•An investment in a subsidiary or an interest in a variable
interest entity that is required to be consolidated
•Employers’ and plans’ obligations for pension benefits, other
postretirement benefits, postemployment benefits,
employee stock option and stock purchase plans, and other
forms of deferred compensation arrangements
•Financial assets and financial liabilities recognized under
leases
•Deposit liabilities, which are withdrawable on demand, of
depository institutions
•Financial instruments that are, in whole or in part, classified
by the issuer as a component of shareholder’s equity

22. #cbizmhmwebinar 22
AMENDMENTS TO INVESTMENTS

23. #cbizmhmwebinar 23
Amendments to Investments
Codification
Topic 320
Investments
– Debt
Securities
Topic 321
Investments –
Equity
Securities
Topic 320
Investments -
Debt and
Equity
Securities
• Topic 320 is renamed from Investments –
Debt and Equity Securities to Investments –
Debt Securities
• Topic 321 Investments – Equity Securities
was created
• Topic 325 Investments – Other
Section B (Cost Method) was
removed entirely

24. #cbizmhmwebinar 24
Amendments to Investments
Debt Securities
• Retains current GAAP classification
• Investments in debt securities must be classified at acquisition, according to
management’s intent, into one of the following categories and accounted for
accordingly:
Securities that are bought and held principally for the purpose of selling them
in the near term and therefore held for only a short period of time.
• Subsequently reported at fair value
• Changes in fair value should be reported through earnings
Securities that an entity has the intent and ability to hold to maturity.
• Carried at amortized cost
Debt securities that are not trading or held to maturity
• Changes in its fair value are reported through other comprehensive
income, net of tax, until the security is collected, disposed of, or written off
(as long as the security is not designed as being hedged)
• All or a portion of the unrealized gain or loss of an available for sale
security designated as being hedged in a fair value hedge is recognized in
earnings during the period being hedged
Trading
Held to
Maturity
Available-for
Sale

25. #cbizmhmwebinar 25
Amendments to Investments
Equity Securities
 Investment in equity
securities are no longer
categorized as either trading
or available for sale
 All investments are now
measured at fair value
 Nonmarketable securities
can no longer be measured
at cost
AFTER AMENDMENTS:
No Longer Categorized as
Trading or Available for
Sale
Available
for Sale
Trading

26. #cbizmhmwebinar 26
Amendments to Investments
Equity Securities
 General Rule: All unrealized
gains and losses run through
earnings
 Exception: An entity may elect to
measure an equity security without
a readily determinable fair value
that does not qualify for the
practical expedient to estimate fair
value at its cost minus impairment, if
any, plus or minus changes resulting
from observable price changes in
orderly transactions for the identical
or a similar investment of the same
issuer.
AFTER AMENDMENTS:
No Longer Categorized as
Trading or Available for
Sale
Available
for Sale
Trading

27. #cbizmhmwebinar 27
Amendments to Investments
In Scope Specifically Excluded
 Investments in equity
securities
 Investments in other
ownership interests,
including:
 Investments in
partnerships
 Unincorporated joint
ventures
 Limited liability
companies
 Derivative instruments, including those that
have been separated from a host contract
 Investments accounted for under the equity
method
 Investments in consolidated subsidiaries
 An exchange membership that has the
characteristics specified in paragraph 940-
340-25-1(b) for an ownership interest in the
exchange
 Federal Home Loan Bank and Federal Reserve
Bank Stock
 Entities in certain industries, including:
 Brokers and dealers in securities
 Defined benefit pension and other
postretirement plans
 Investment companies
Equity Securities

28. #cbizmhmwebinar 28
Amendments to Investments
Example: Equity Investment Transition Guidance
Fact Pattern:
ABC Holdings is a private company and reports annually on a calendar year. ABC Holdings owns two
investments. One investment is categorized as trading and has an opening balance (at 1/1/2019) of $75,000.
The other investment is categorized as available-for sale, has an opening balance (at 1/1/2019) of $50,000,
and reported unrealized gains of $5,000 in AOCI as of 1/1/2019. During 2019, the trading investment had an
unrealized gain of $6,500 and the available-for-sale investment had an unrealized gain of $4,000.
How would ABC Holdings report these two investments as of 12/31/2019, with the implementation of ASU
2016-01 incorporated in 2019?
Answer:
1) $5,000 reclass
from AOCI to RE
2) $10,500 reported
in earnings
 Cumulative-effect adjustment from AOCI to RE would be reported for the $5,000
because all changes now run through earning.
 The current year unrealized gains would be reported in earnings in the amount of
$10,500.

29. #cbizmhmwebinar 29
Amendments to Investments
Equity Securities
Impairment Analysis for Equity Securities Without Readily Determinable Fair Values:
• Write down to its fair value if qualitative impairment assessment indicates that
impairment exists and the fair value is less than the carrying value
• Consider the following in your qualitative assessment:
1. Significant deterioration in the earnings performance, credit rating, asset
quality, or business prospects of the investee
2. Significant adverse change in the regulatory, economic, or technological
environment of the investee
3. Significant adverse change in the general market condition of either the
geographical area or the industry in which the investee operates
4. Bona fide offer to purchase, an offer by the investee to sell, or a completed
auction process for the same or similar investment for an amount less than
the carrying amount of that investment
5. Factors that raise significant concerns about the investee’s ability to continue
as a going concern

30. #cbizmhmwebinar 30
Amendments to Investments
Equity Securities – New Disclosures
Disclosures for Equity Securities Without Readily Determinable Fair Values:
1) The carrying amount of investments without readily determinable fair values
2) The amount of impairments and downward adjustments, if any, both annual and
cumulative
3) The amount of upward adjustments, if any, both annual and cumulative
4) As of the date of the most recent statement of financial position, additional
information (in narrative form) that is sufficient to permit financial statement users
to understand the quantitative disclosures and the information that the entity
considered in reaching the carrying amounts and upward or downward adjustments
resulting from observable price changes

31. #cbizmhmwebinar 31
AMENDMENTS TO INCOME TAXES

32. #cbizmhmwebinar 32
Amendments to Income Taxes
Currently GAAP States: “An entity that recognizes a deferred tax asset
relating only to a net unrealized loss on available-for-sale securities may at
the same time conclude that it is more likely than not that some or all of
that deferred tax asset will not be realized.” [ASC 320-10-45-3]
ASU 2016-01 States: “An entity shall evaluate the need for a valuation
allowance on a deferred tax asset related to available-for-sale debt
securities in combination with the entity’s other deferred tax assets.” [ASC
740-10-30-16, as amended with issuance of ASU 2016-01]
Valuation
Allowance for
Available-for-Sale
Securities
Valuation
Allowance for all
Other Deferred Tax
Assets

33. #cbizmhmwebinar 33
AMENDMENTS TO FINANCIAL INSTRUMENTS

34. #cbizmhmwebinar 34
Amendments to Financial Instruments
Financial Instruments – Presentation Matters
ASU 2016-01 adds Other Presentation Matters section to ASC 825-10
Financial Instruments – Overall
It requires that financial assets and financial liabilities be disaggregated by measurement
category and form of financial asset (that is, securities or loans and receivables) in the
statement of financial position or the accompanying notes to the financial statements.
What is Measurement Category? For example, financial assets measured at fair value
through net income are presented separately from assets measured at fair value through
other comprehensive income.
CURRENT GAAP: Disaggregate information by form (that is loans and
receivables versus securities)
CHANGE: Disaggregate information by form AND disaggregate
information by measurement category in the statement of financial
position or in the notes to the financial statements.

35. #cbizmhmwebinar 35
Amendments to Financial Instruments
Fair Value Option – Financial Liability
Under Current GAAP:
Fact Pattern: $1,000,000 debt issued and outstanding. The fair value option was elected for
this financial liability. At issuance, the interest rate was at market and the debt was issued at
fair value. Debt matures in year 4.
YR1 - Initial Measurement:
DR Cash $1,000,000
CR Debt $1,000,000
To record the fair value of debt issued
Subsequent fact pattern: In year 2, the Company has significant litigation matters that are
expected to have a significant impact on the Company. The market lowers the bond value to
$900,000 because of this potential credit risk.
YR 2 – Subsequent Measurement (Mark-to-Market ):
DR Debt $100,000
CR Gain – Change in FV of Debt $100,000
Essentially, entities have been recording a gain for becoming financially unsecure!!

36. #cbizmhmwebinar 36
Amendments to Financial Instruments
Fair Value Option – Financial Liability
ASU 2016-01 Will Address This Issue:
General Rule: If an entity has designated a financial liability under
the fair value option, the entity shall measure the financial liability
at fair value with qualifying changes in fair value recognized in net
income.
Exception: Changes in fair value related to instrument-specific credit
risk shall run through OCI (and presented separately).

37. #cbizmhmwebinar 37
Amendments to Financial Instruments
Fair Value Option – Financial Liability
How to Calculate the Instrument-Specific Credit Risk:
Apply the chosen method consistently to each
financial liability from period to period

38. #cbizmhmwebinar 38
Amendments to Financial Instruments
Disclosure Changes
 Nonpublic business entities – amendments eliminate the requirement in ASC 825 to
disclose the fair values of financial instruments measured at amortized costs on the
balance sheet.
 Public business entities –
 Eliminates the requirement to disclose the method(s) and significant assumptions
used to estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost on the balance sheet
 Requires continued disclose on how they categorized fair value measurements in
the fair value hierarchy
 Expands the exception for disclosures about fair values whether or not recognized
in the statement of financial position for:
 Investments in equity securities accounted for under the measurement
guidance for equity securities without readily determinable fair values
 Trade receivables and payables due in one year or less
 Deposit liabilities with no defined or contractual maturities

39. #cbizmhmwebinar 39
Amendments to Financial Instruments
Disclosure Changes
 Public business entities – continued
 Removes the practical expedient in ASC 825-10-50-16 that states:
If it is not practicable for an entity to estimate the fair value of a financial
instrument or a class of financial instruments, both of the following shall be
disclosed:
a. Information pertinent to estimating the fair value of that financial
instrument or class of financial instruments (such as the carrying
amount,
effective interest rate, and maturity)
b. The reasons why it is not practicable to estimate fair value.
 Removes the illustrations in ASC 825-10-55 that appeared to permit the use of an
entry price and requires the use of an exit price when measuring the fair value of
financial instruments in disclosures

40. #cbizmhmwebinar 40
Amendments to Financial Instruments
Disclosure Changes
 Public business entities – continued
 Fair Value Option –
 The amount of change, during the period and cumulatively, in the fair value
of the liability that is attributable to changes in instrument-specific credit risk
 How the unrealized gains and losses attributable to changes in instrument-
specific credit risk were determined
 If a liability is settled during the period, the amount, if any, recognized in OCI
that was recognized in net income at settlement

41. #cbizmhmwebinar 41
AMENDMENTS TO OTHER COMPREHENSIVE INCOME

42. #cbizmhmwebinar 42
Amendments to Other Comprehensive Income
Items Within Comprehensive Income
Topic ASC 220: Comprehensive Income was amended as follows:
• Currently: Comprehensive income currently includes unrealized gains and losses on available-
for-sale securities.
• CHANGE: Comprehensive income will now only include unrealized gains and losses on
available-for-sale debt securities. Equity securities run through the P&L.
• Currently: Subsequent decreases (if not an other-than-temporary impairment) or increases in
fair value of available-for-sale debt securities previously written down as impaired
• CHANGE: Available-for-sale categorization for equity securities no longer exists
• CHANGE: ASU 2016-13 eliminates the “other-than-temporary impairment terminology”.
Impaired if fair value is less than amortized cost basis. Impairment related to credit losses
are recorded as allowance for credit losses (limited to amount that the FV is less than the
amortized cost basis). Impairments unrelated to credit losses are recorded through other
comprehensive income.
• New OCI Item Entirely: Changes in fair value attributable to instrument-specific credit risk of
liabilities for which the fair value option was elected

43. #cbizmhmwebinar 43
?
QUESTIONS

44. #cbizmhmwebinar 44
If You Enjoyed This Webinar…
Upcoming Courses:
• 7/17: Second Quarter Accounting and Financial Reporting Issues Update
• 7/20 & 8/10: Are You Leaving Too Much on the Table? Tax Saving Strategies for
Growing Businesses
• 7/24 & 7/31: The Taxing Element of the New Revenue Recognition Guidance
• 7/26 & 8/3: The New Leasing Standard – Your Questions Answered
Recent Publications:
• Changes May be on the Way for Public Company Audit Reports
• Share-Based Payments Receive Some Accounting Clarity
• How to Navigate Complex Debt and Equity Transactions
• FASB Revisits Accounting for Premiums on Callable Debt Securities

45. #cbizmhmwebinar 45
Connect with Us
linkedin.com/company/
mayer-hoffman-mccann-p.c.
@mhm_pc
youtube.com/
mayerhoffmanmccann
slideshare.net/mhmpc
linkedin.com/company/
cbiz-mhm-llc
@cbizmhm
youtube.com/
BizTipsVideos
slideshare.net/CBIZInc
MHM CBIZ

46. #cbizmhmwebinar 46
THANK YOU
CBIZ & Mayer Hoffman McCann P.C.
cbizmhmwebinars@cbiz.com