The FASB has been busy

While you have been wrapped up in year-end close and audit work, the FASB has been busy issuing new and proposed standards in 2017.  The FASB has issued six – yes, six – new standards in 2017 as well as two proposals.  To help you catch up, this blog will cover the most significant new standards as well as the two proposals.

Significant new standards:

  • Goodwill Impairment
    • Effective in 2020, early adoption permitted.
    • The standard eliminates the old two-step approach to determining impairment.
    • Instead, the loss is the difference between fair value and carrying value calculated in step one.

This simplification will likely be a target of early adoption by many companies because it greatly simplifies the testing process.

  • Definition of a Business
    • Effective in 2018, early adoption permitted.
    • In determining if a purchase/sale is a business there is now an initial screen – if substantially all of the fair value is in a single asset or a group of similar assets, then it is the purchase/sale of an asset.
    • A business must include an input and a substantive process which provide ability to create outputs (output is consistent with ASC 606); otherwise it is an asset.
  • Gains and losses from derecognition of nonfinancial assets
    • Effective in 2018, adoption should coincide with revenue standard.
    • Covers sales of non-financial assets (including real estate) to non-customers.
    • Non-financial assets include “in substance” nonfinancial assets such as the stock of a subsidiary where all the fair value is concentrated in a nonfinancial asset.
    • Full gain/loss is recognized even if a non-controlling interest is retained.

The two proposed standards include:

  • Inventory disclosures; new disclosures include
    • Disaggregated disclosure by
      • Component (for example, raw materials, work-in-process, finished goods, and supplies)
      • Measurement basis
    • Changes to the inventory balance that are not specifically related to the purchase, manufacture, or sale of inventory in the ordinary course of business .

So much for these disclosure reviews resulting in fewer disclosures. Comments are due by March 13 if you wish to make any.

  • Debt Classification now defines non-current and current debt as follows:
    • Noncurrent
      • The debt is not contractually due for more than a year.
      • The debtor has the right to push out for more than a year.
    • A waiver of debt covenant violation resulting in acceleration needs to be obtained before the F/S are issued, otherwise the debt is considered current.
    • Current
      • All other debt.
      • Refinanced short term debt would be shown as current.

It’s the last point that is the real change.  Current debt that is refinanced before the financial statements are issued can no longer be shown as non-current.  Comments are due by May 5.



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