FASB Update Brian H. Marshall, Partner, McGladrey & Pullen, LLP Richard K. Stuart, Partner, McGladrey & Pullen, LLP June 1...
Agenda   The Big Picture   Certain Significant ASUs issued in 2010-2011   Selected EITF-debated ASUs issued in 2010-   ...
The Big Picture                  2   ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
People Matters   FASB    -   Board back to 7 members    -   Leslie Seidman appointed chairman    -   Two new board member...
Blue Ribbon Panel (BRP) - PrivateCompany Financial Reporting   In January, the BRP issued its recommendations to    the F...
Certain Significant ASUs Issued in 2010-2011                       5           ©2011 McGladrey & Pullen, LLP. All Rights R...
ASU 2010-20 – Disclosures about the Credit Quality ofFinancing Receivables and Allowance for Credit Losses   Objective is...
ASU 2010-20 - Existing Disclosures - Amended   Rollforward schedule of the allowance for loan    losses (ALL) on a portfo...
ASU 2010-20 - Additional Disclosures   Credit quality indicators by class of financing    receivable   Aging of past due...
ASU 2010-20   For nonpublic entities, the disclosures are    effective for annual reporting periods ending on    or after...
ASU 2011-02 – Creditor’s Determination ofWhether a Restructuring Is a TDR   Provides additional guidance to assist credit...
ASU 2011-02   Clarifies the guidance on a creditor’s evaluation of    whether it has granted a concession:    -   If a de...
ASU 2011-02   A creditor is precluded from using the    borrower’s effective interest rate test in its    evaluation of w...
ASU 2011-03 – Reconsideration of EffectiveControl for Repurchase Agreements (Repos)   Repos are agreements whereby a tran...
ASU 2011-03   ASU removes one of the conditions required to be    met for transferor to be considered to have    maintain...
Selected EITF-debated ASUs Issued in             2010-2011                 15       ©2011 McGladrey & Pullen, LLP. All Rig...
ASU 2010-23 – Measuring Charity Care   Affects health care entities that provide charity care   Currently diversity in p...
ASU 2010-24 – Insurance Claims andRecoveries   Affects health care entities   Currently diversity in accounting for medi...
ASU 2010-24   Eliminates industry exception    -   Amendments are consistent with existing guidance        in ASC 210-20 ...
ASU 2010-25 – Participant Loans   Affects any defined contribution pension plan that allows    participant loans   Clari...
ASU 2010-25   ASU requires participant loans be classified as    notes receivable from participants    -   Segregated fro...
ASU 2010-25   Amendments should be applied retrospectively    to all prior periods presented, effective for fiscal    yea...
ASU 2010-26 – Accounting for Costs Associatedwith Acquiring or Renewing Insurance Contracts   Affects entities under ASC ...
ASU 2010-26   The following costs incurred in the acquisition of    new and renewal contracts should be    capitalized:  ...
ASU 2010-26   Direct-response advertising costs should be included in    deferred acquisition costs only if the capitaliz...
ASU 2010-26   Effective for fiscal years, and interim periods    within those fiscal years, beginning after    December 1...
ASU 2010-27 – Fees Paid to the FederalGovernment by Pharmaceutical Manufacturers   Affects entities that are subject to t...
ASU 2010-27   The liability for the fee should be estimated and    recorded in full upon the first qualifying sale    -  ...
ASU 2010-28 – When to Perform Step 2 of the GoodwillImpairment Test for Reporting Units with Zero orNegative Carrying Amou...
ASU 2010-28   Some entities with RUs that have zero or    negative carrying amounts historically    concluded that Step 1...
ASU 2010-28   The ASU modifies Step 1 of the goodwill    impairment test for RUs with zero or negative    carrying amount...
ASU 2010-28   Upon adoption of the amendments, an entity    with a RU whose carrying amount is zero or    negative is req...
Certain Other FASB-only Projects               32       ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
Proposed ASU – Testing Goodwill forImpairment   Issued in April with comments due in early June   Specifically addresses...
Proposed ASU – Testing Goodwill forImpairment   Qualitative factors (examples of events or    circumstances) to consider ...
Proposed ASU – Testing Goodwill forImpairment   Effective for annual and interim impairment    tests performed for fiscal...
Certain Other FASB-only Projects   Investment properties   Disclosures about an employer’s participation in    a multiem...
QUESTIONS?    37       ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
Upcoming SlideShare
Loading in …5
×

FASB Update - presented by McGladrey at June 2011 NYSSCPA Private Company Accounting & Auditing Conference

746 views

Published on

McGladrey & Pullen presentation (Brian Marshall & Rich Stuart) on FASB update at June 2011 NYSSCPA Private Company Accounting & Auditing Conference

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
746
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
14
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

FASB Update - presented by McGladrey at June 2011 NYSSCPA Private Company Accounting & Auditing Conference

  1. 1. FASB Update Brian H. Marshall, Partner, McGladrey & Pullen, LLP Richard K. Stuart, Partner, McGladrey & Pullen, LLP June 16, 2011 0 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  2. 2. Agenda The Big Picture Certain Significant ASUs issued in 2010-2011 Selected EITF-debated ASUs issued in 2010- 2011 Certain Other FASB-only Projects 1 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  3. 3. The Big Picture 2 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  4. 4. People Matters FASB - Board back to 7 members - Leslie Seidman appointed chairman - Two new board members • One with private company focus 3 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  5. 5. Blue Ribbon Panel (BRP) - PrivateCompany Financial Reporting In January, the BRP issued its recommendations to the Financial Accounting Foundation (FAF) Significant recommendations include: - creation of a separate private company standards board - a new standard-setting model that follows GAAP with exceptions for private companies In March, the FAF formed a Trustee Working Group to: - conduct outreach to stakeholders - seek input on improvements, including BRP’s recommendations 4 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  6. 6. Certain Significant ASUs Issued in 2010-2011 5 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  7. 7. ASU 2010-20 – Disclosures about the Credit Quality ofFinancing Receivables and Allowance for Credit Losses Objective is to provide disclosure information that allows the users of the financial statements to understand the following: - The nature of credit risk inherent in the entity’s portfolio of financing receivables - How that risk is analyzed and assessed in arriving at the allowance for loan losses - The changes, and reasons for those changes, in the allowance for loan losses Defines two levels of disaggregation: - Portfolio segment - Class of financing receivable Provides additional implementation guidance to determine the appropriate level of disaggregation of information 6 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  8. 8. ASU 2010-20 - Existing Disclosures - Amended Rollforward schedule of the allowance for loan losses (ALL) on a portfolio segment basis, with the ending balance further disaggregated based on impairment method - For each disaggregated ending balance, the related recorded investment in financing receivables The nonaccrual status of financing receivables by class of financing receivables Impaired financing receivables by class of financing receivables 7 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  9. 9. ASU 2010-20 - Additional Disclosures Credit quality indicators by class of financing receivable Aging of past due by class of financing receivable Troubled debt restructurings (TDRs) that occurred during the period and effect on the ALL TDRs that re-defaulted during the period Significant purchases and sales of financing receivables during the period, by portfolio segment 8 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  10. 10. ASU 2010-20 For nonpublic entities, the disclosures are effective for annual reporting periods ending on or after December 15, 2011 9 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  11. 11. ASU 2011-02 – Creditor’s Determination ofWhether a Restructuring Is a TDR Provides additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a TDR TDR has occurred if both of the following exist: - Debtor is experiencing financial difficulties - Restructuring constitutes a concession Clarifies the guidance on a creditors evaluation of whether a debtor is experiencing financial difficulties - A borrower that is not currently in default may still be considered to be experiencing financial difficulty if default is probable in the foreseeable future without the modification 10 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  12. 12. ASU 2011-02 Clarifies the guidance on a creditor’s evaluation of whether it has granted a concession: - If a debtor does not otherwise have access to funds at a market interest rate, the restructuring would be considered to be at a below-market rate, which may indicate the creditor has granted a concession - A restructuring that results in a temporary or permanent increase in the contractual interest rate does not preclude the restructuring from being considered a concession - A restructuring that results in a delay in payment that is insignificant is not a concession 11 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  13. 13. ASU 2011-02 A creditor is precluded from using the borrower’s effective interest rate test in its evaluation of whether a restructuring constitutes a TDR Effective date - For nonpublic entities, annual periods ending on or after December 15, 2012, including interim periods within those annual periods 12 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  14. 14. ASU 2011-03 – Reconsideration of EffectiveControl for Repurchase Agreements (Repos) Repos are agreements whereby a transferor transfers financial assets (e.g.; securities) to a transferee in exchange for cash collateral Concurrently, the transferor agrees to repurchase the financial assets (or equivalent assets) in the future for a fixed price Transfers and related repurchases typically occur in a very short time frame Accounted for as sales of financial assets when transferor no longer maintains effective control over the transferred asset 13 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  15. 15. ASU 2011-03 ASU removes one of the conditions required to be met for transferor to be considered to have maintained effective control: - No longer need to have the ability to repurchase or redeem financial assets on substantially the agreed terms, even if transferee defaults - With removal of this condition, level of cash collateral received by the transferor is irrelevant when determining whether sale accounting is appropriate Effective prospectively in first interim or annual period beginning on or after December 15, 2011 for new or modified transactions 14 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  16. 16. Selected EITF-debated ASUs Issued in 2010-2011 15 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  17. 17. ASU 2010-23 – Measuring Charity Care Affects health care entities that provide charity care Currently diversity in practice regarding the measure of charity care used for disclosure purposes: - Cost measurement - Revenue measurement Requires that cost be used as the measurement basis for charity care disclosure purposes and that cost be identified as the direct and indirect costs of providing the charity care Requires disclosure of the method used to identify or determine such costs Effective for fiscal years beginning after December 15, 2010 16 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  18. 18. ASU 2010-24 – Insurance Claims andRecoveries Affects health care entities Currently diversity in accounting for medical malpractice liabilities and the related anticipated recoveries - Most health care entities net insurance recoveries against the liability - Some present the anticipated insurance recovery and the liability on a gross basis Clarifies that a health care entity should not net insurance recoveries against a related claim liability - Also, the amount of the claim liability should be determined without consideration of insurance recoveries 17 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  19. 19. ASU 2010-24 Eliminates industry exception - Amendments are consistent with existing guidance in ASC 210-20 on determining whether assets and liabilities can be offset and presented on a net basis Effective for fiscal years, and interim periods within those years, beginning after December 15, 2010 18 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  20. 20. ASU 2010-25 – Participant Loans Affects any defined contribution pension plan that allows participant loans Clarifies how loans to participants should be classified and measured by defined contribution pension benefit plans. - Participant loans are currently classified as investments in accordance with the defined contribution pension plan guidance - ASC 962-325 requires most investments held by a plan, including participant loans, to be presented at fair value - In practice, most participant loans are carried at their unpaid principal balance plus any accrued but unpaid interest, which was considered a good faith approximation of fair value • May not conform to ASC 820 19 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  21. 21. ASU 2010-25 ASU requires participant loans be classified as notes receivable from participants - Segregated from plan investments - Measured at their unpaid principal balance plus any accrued but unpaid interest More meaningful classification and measure of participant loans as: - A participant taking out such a loan essentially borrows against its own individual vested benefit balance - Participant loans cannot be sold by the plan - In default, there would be no effect on the plan’s investment returns or any other participant’s account balance 20 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  22. 22. ASU 2010-25 Amendments should be applied retrospectively to all prior periods presented, effective for fiscal years ending after December 15, 2010 Early adoption is permitted 21 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  23. 23. ASU 2010-26 – Accounting for Costs Associatedwith Acquiring or Renewing Insurance Contracts Affects entities under ASC 944, Financial Services - Insurance, that incur costs in the acquisition of new and renewal insurance contracts Addresses diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral 22 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  24. 24. ASU 2010-26 The following costs incurred in the acquisition of new and renewal contracts should be capitalized: - Incremental direct costs of contract acquisition - Certain costs related directly to the following acquisition activities performed by the insurer for the contract: • Underwriting • Policy issuance and processing • Medical and inspection • Sales force contract selling 23 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  25. 25. ASU 2010-26 Direct-response advertising costs should be included in deferred acquisition costs only if the capitalization criteria in the direct-response advertising guidance in ASC 340-20 are met All other acquisition-related costs should be charged to expense as incurred, including costs incurred by the insurer for: - soliciting potential customers, market research, training, administration, unsuccessful acquisition or renewal efforts, and product development If the initial application of this ASU results in the capitalization of acquisition costs that had not been capitalized previously, the entity may elect not to capitalize those types of costs 24 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  26. 26. ASU 2010-26 Effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 The amendments in this ASU should be applied prospectively upon adoption - Retrospective application to all prior periods presented upon the date of adoption also is permitted, but not required - Early adoption is permitted, but only at the beginning of an entity’s annual reporting period 25 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  27. 27. ASU 2010-27 – Fees Paid to the FederalGovernment by Pharmaceutical Manufacturers Affects entities that are subject to the pharmaceutical fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the Acts) and how they should recognize and classify these fees - The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011 - An entity’s portion of the annual fee becomes payable to the U.S. Treasury once the entity has a gross receipt from branded prescription drug sales to any specified government program or in accordance with coverage under any government program for each calendar year beginning on or after January 1, 2011 26 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  28. 28. ASU 2010-27 The liability for the fee should be estimated and recorded in full upon the first qualifying sale - Record corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable Effective for calendar years beginning after December 31, 2010, when the fee initially becomes effective 27 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  29. 29. ASU 2010-28 – When to Perform Step 2 of the GoodwillImpairment Test for Reporting Units with Zero orNegative Carrying Amounts Affects entities that have recognized goodwill in a reporting unit (RU) whose carrying amount is zero or negative Testing for goodwill impairment is a two-step test - Step 1 - An entity must assess whether the carrying amount of a RU exceeds its fair value - Step 2 - If it does, an entity must determine whether goodwill has been impaired and calculate the amount of that impairment 28 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  30. 30. ASU 2010-28 Some entities with RUs that have zero or negative carrying amounts historically concluded that Step 1 of the test is automatically satisfied because the fair value of the RU will generally be greater than zero - As a result, Step 2 of the test was not performed despite factors indicating that goodwill may be impaired 29 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  31. 31. ASU 2010-28 The ASU modifies Step 1 of the goodwill impairment test for RUs with zero or negative carrying amounts - Would be required to perform Step 2 of the goodwill impairment test if adverse qualitative factors indicate that goodwill impairment is more likely than not For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 30 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  32. 32. ASU 2010-28 Upon adoption of the amendments, an entity with a RU whose carrying amount is zero or negative is required to assess whether it is more likely than not that the goodwill of the RU is impaired - If determined that it is more likely than not that the goodwill is impaired, the entity should perform Step 2 of the goodwill impairment test - Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption 31 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  33. 33. Certain Other FASB-only Projects 32 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  34. 34. Proposed ASU – Testing Goodwill forImpairment Issued in April with comments due in early June Specifically addresses private company concerns regarding cost/complexity of goodwill impairment testing ASU allows an entity to qualitatively evaluate whether it is more likely than not that the fair value of a RU is less than its carrying amount prior to performing step one 33 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  35. 35. Proposed ASU – Testing Goodwill forImpairment Qualitative factors (examples of events or circumstances) to consider are included in ASU and replace existing guidance Carryforward of RU’s prior year fair value would no longer be allowed If not more likely than not that the fair value of a RU is less than its carrying amount, then goodwill is not considered impaired If it is more likely than not that the fair value of a RU is less than its carrying amount, then must complete step one of the impairment test 34 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  36. 36. Proposed ASU – Testing Goodwill forImpairment Effective for annual and interim impairment tests performed for fiscal years beginning after December 15, 2011 Earlier adoption permitted 35 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  37. 37. Certain Other FASB-only Projects Investment properties Disclosures about an employer’s participation in a multiemployer pension plan Presentation of the provision for bad debts and disclosures of net revenue and the allowance for doubtful accounts for health care entities Fees paid to the federal government by health insurers Accounting for deconsolidation of a subsidiary that is in-substance real estate 36 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.
  38. 38. QUESTIONS? 37 ©2011 McGladrey & Pullen, LLP. All Rights Reserved.

×