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FASB Releases Updates on Accounting for Leases

By: Sara Crabtree , Senior Manager Previous lease accounting practices have been criticized for failing to provide accurate financial statements. Those practices did not require the recognition of the assets and liabilities resulting from operating leases to be on the balance sheet. On February 25, 2016, the Financial Accounting Standards Board (“FASB”) released Topic 842, Leases. The purpose of this update is to increase the transparency and comparability of entities which engage in leasing activities who previously kept their leasing obligations off the balance sheet. The Board’s intention is to require enough information on an organization’s financial statements so users may have. Read More.

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FASB Publishes Landmark Credit Loss Standard

The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . Published on June 16, the amendments represent the most significant change to the FASB’s guidance for writing down bad loans and securities. The updated guidance has also been added to U.S. GAAP under Topic 326, Financial Instruments—Credit Losses. This ASU removes the “probable” requirement for recognition of credit losses. The 2008 financial crisis was frequently blamed for delayed recognition of impaired loans. The new current expected credit loss (CECL) model allows entities to recognize the full amount of credit losses that are expected based on both historical and forward looking information.. Read More.

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Equity Method of Accounting Updated

Impacting companies with an investment that now qualifies for the equity method of accounting due to increased ownership interest or influence, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (ASU) No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. Current GAAP requires that when an investment was previously below the threshold for equity method but then qualifies, the investor was required to retroactively value the investment as if it had been under the equity method from the initial purchase. As part of the simplification initiative, ASU. Read More.

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Nonprofit Financial Statement Project Progresses

On March 2nd, the Financial Accounting Standards Board (“FASB”) continued its discussion of the Not-for-Profit Financial Statement Project, Phase 1. During this meeting, they discussed two major topics: use of an operating measure and liquidity. Disclosures about Operating Measures by Nonprofits that Choose to Present Such a Measure In its original proposal, the FASB had included a requirement to present an intermediate measure of operations based on mission and availability. After receiving feedback, the Board felt this issue would be better suited to be discussed in Phase 2 of the project. However, they wanted to address in Phase 1 those. Read More.

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SEC to Issue Statement with IFRS Proposal

The Securities and Exchange Commission (“SEC”) plans to publish a statement that affirms U.S. support for international accounting standards convergence, and the SEC’s expectation that U.S. companies’ financial statements will continue to be prepared under U.S. GAAP and not International Financial Reporting Standards (IFRS). Announced by SEC Chief Accountant James Schnurr at the SEC Speaks conference, the statement is likely to be included in a proposal that would allow U.S. companies to voluntarily supplement IFRS information with U.S. GAAP financial statements. No timetable has been set for the publication of the proposal and accompanying statement. More on the SEC’s IFRS statement can be. Read More.

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FASB to Propose Slight Changes to Revenue Standard

As the Financial Accounting Standards Board (“FASB”) prepares its annual project for making technical corrections to U.S. GAAP, the standard setter is concurrently planning to issue a separate proposal featuring minor changes to its revenue recognition standard. The proposed revenue corrections cover several areas, including the clarification of contracts within the scope of Topic 944, Financial Services — Insurance. Hoping to issue the revenue clarifications by the end of March, the FASB decided to release the amendments separately due to the prominence of Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers. Upon release, the proposed changes will have. Read More.

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