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Task Force to Release Consensus-for-Exposure on Cloud Computing Implementation Costs

Emerging Issues Task Force (“EITF”) members plan to release a consensus-for-exposure concerning EITF Issue No. 17-A, “Customer’s Accounting for Implementation, Setup, and Other Upfront Costs (Implementation Costs) Incurred in a Cloud Computing Arrangement That Is Considered a Service Contract.” The consensus-for-exposure is likely to address income statement alignment of implementation costs expensed with other expenses related to a cloud computing contract. The EITF has yet to announce whether the changes from Issue 17-A can be applied via analogy to contracts outside of the project’s scope. Such contracts include those that allow the use of intangible assets. In related news, the. Read More.

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FASB Q&A Issued for Staff Accounting Bulletin on Tax Reform

The Financial Accounting Standards Board (“FASB”) has published a Staff Q&A regarding whether private entities and nonprofits can apply Staff Accounting Bulletin (“SAB”) No. 118 (Topic 5.EE, Income Tax Accounting Implications of the Tax Cuts and Jobs Act). In its Staff Q&A, the FASB says it does not oppose private entities and nonprofits applying the Securities and Exchange Commission’s interpretive guidance for tax reform . The document also notes that such companies and organizations that employ SAB No. 118 would comply with GAAP. SAB No. 118 was issued in response to the Tax Cuts and Jobs Act. The guidance allows an entity, in certain situations, to include in its financial statements. Read More.

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SEC Official Asks Public Companies to Focus on Key FASB Standards

Securities and Exchange Commission (“SEC”) official Michael Dusza is advising public companies to consider how the adoption of several standards from the Financial Accounting Standards Board (“FASB”) could impact their financial reporting controls. During a speech last month in Washington D.C., Dusza stressed that the accounting changes for revenue recognition, leases, and credit losses are likely to create significant challenges when public companies test internal controls during the adoption phase. Accounting Standards Update (“ASU”) No. 2014-09, Revenue From Contracts With Customers (Topic 606), is effective January 1, 2018 for public business entities. ASU No. 2016-02, Leases (Topic 842), will be. Read More.

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FASB Proposes Expanding Allowed Interest Rates to Hedge Accounting Standard

The list of permissible U.S. benchmark interest rates for the Financial Accounting Standards Board’s (“FASB”) hedge accounting standard could expand. In its recently issued Proposed Accounting Standards Update (“ASU”), the FASB would add the Overnight Index Swap rate based on the Secured Overnight Financing Rate as a fifth U.S. benchmark interest rate. The addition would help companies avoid any potential expenses and complexities related to using varying cash flows and discount rates to evaluate the hedged item and the hedging instrument. Comments are due Friday, March 30.  

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New SEC Interpretive Guidance Addresses Tax Reform

In response to the passing of the Tax Cuts and Jobs Act, the Securities and Exchange Commission (“SEC”) has released interpretive guidance to help public companies and auditors adapt to the tax changes and comply with accounting for income taxes. The first guidance is in the form of Staff Accounting Bulletin (“SAB”) No. 118 (Topic 5.EE, Income Tax Accounting Implications of the Tax Cuts and Jobs Act). Under SAB No. 118, companies preparing their 2017 fourth-quarter and end-of-year financial statements and regulatory filings will be allowed to provide what the SEC calls “reasonable estimates” and “provisional amounts” for tax-related line items.. Read More.

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Recap of Private Company Council’s December Meeting

At its December 8 meeting, the Private Company Council provided feedback on the following topics: Customer’s Accounting for Implementation, Setup, and Other Upfront Costs (Implementation Costs) Incurred in a Cloud Computing Arrangement That Is Considered a Service Contract: Council members declared that implementation costs are to be capitalized in such arrangements, except fees for a cloud computing arrangement that are considered a service contract. Financial Performance Reporting: Council members examined the results of Financial Accounting Standards Board (“FASB”) staff’s research on private company financial statements, and the possible impact disaggregation of performance information may have on the private company sector.. Read More.

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