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Smaller Banks Can Avoid Using Complex Models in Calculating Loss Reserves

Community bankers could be exempt from using the complex models necessary to comply with the Financial Accounting Standards Board’s (“FASB”) credit loss standard. Banking regulators said that the current expected credit loss model under Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, is flexible enough that smaller lending institutions are not required to purchase expensive software or use complex modeling techniques to meet the standard’s provisions for calculating loss reserves. During a February 27 webcast, the Federal Reserve’s Joanne Wakim stated that small banks could calculate loss reserves. Read More.

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FASB Issues Amendments to Financial Instruments Standard

The Financial Accounting Standards Board (“FASB”) has issued a new standard that clarifies guidance under Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments—Overall (Subtopic 825-10). ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, addresses the following issues: Issue 1: Equity Securities without a Readily Determinable Fair Value — Discontinuation Issue 2: Equity Securities without a Readily Determinable Fair Value — Adjustments Issue 3: Forward Contracts and Purchased Options Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities Issue 5: Fair Value Option Liabilities Denominated in a. Read More.

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Revenue Recognition

By: Brynn McNeil, Partner Revenue is critically important in the financial statements of companies. Thus, revenue recognition remains a priority for regulators and the accounting profession as a whole. Implementing the new revenue recognition standard, Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, will likely be the most significant and comprehensive change in many years for most companies. The core principle of FASB ASC 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for. Read More.

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FASB to Revisit Segment Reporting Standard

As investors and analysts’ frustrations continue over segment reporting, the Financial Accounting Standards Board (“FASB”) plans to improve the consistency and application of its guidance. The FASB wants to amend Accounting Standards Codification (“ASC”) 280, Segment Reporting, which requires businesses to disclose information regarding management’s decision-making process and methods for reviewing segment performance. The standard also lists disclosure requirements on products and services, geographic regions, and a company’s top customers. Investors complain that the standard’s disclosure requirements can be excessively wide-ranging. They also say that the current guidance forces companies to group too many operating units, which makes it difficult. Read More.

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Limited Proposal Coming for Payments in Collaborative Arrangements

The Financial Accounting Standards Board (“FASB”) plans to issue for public comment a limited proposal that clarifies when to account for payments in collaborative arrangements as revenue. The proposed amendment to Topic 808, Collaborative Arrangements, would state that certain transactions between collaborative partners that are separate from third-party sales can create revenue that is accounted for consistent with Topic 606, Revenue From Contracts With Customers. FASB members unanimously approved releasing the proposal after reviewing feedback from its December workshops with auditors and companies. Members rejected calls for more specific guidance, stating that it would be tough to establish such guidance for. Read More.

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FASB Finalizes Standard Related to Tax Reform

The Financial Accounting Standards Board (“FASB”) has issued an Accounting Standards Update (“ASU”) concerning certain stranded income tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act. ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, gives financial statement preparers the option to reclassify stranded tax effects in accumulated other comprehensive income to retained earnings in every period wherein the impact of the new corporate income tax rate in the new tax law (or portion thereof) is recognized. As a result of the new guidance,. Read More.

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