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FASB Distinguishes Revenue and Collaborative Arrangements Standards

In its efforts to clarify when collaborative arrangements between companies generate revenue instead of payments between partners, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2018-18— Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. Per the narrow update, when a collaborative participant acts as a customer, the contract should be accounted for under Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers. The accounting must include the recognition, measurement, presentation, and disclosure provisions. ASU No. 2018-18 also allows companies to disclose units of account in collaborative arrangements within the. Read More.

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FASB Improves Consolidation Guidance for Private Companies

Private companies’ headaches over consolidation accounting have been alleviated with the Financial Accounting Standards Board’s (“FASB”) new Accounting Standards Update (“ASU”). The standard, ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, supersedes the FASB’s 2014 exception that gave private companies the option not to consolidate variable interest entities in common control leasing agreements. The private company exception can now be applied to any qualifying common control agreement. By meeting certain criteria, a private company can make an accounting policy election to forgo applying VIE guidance to legal entities under common control. If a. Read More.

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Overnight Index Swap Rate Added to Hedge Accounting Benchmark List

In the latest Accounting Standards Update (“ASU”), the Financial Accounting Standards Board has added the Secured Overnight Financing Rate Overnight Index Swap Rate (“SOFR OIS”) to its list of hedge accounting benchmark interest rates permissible in U.S. GAAP. With ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate Overnight Index Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, the SOFR OIS join the London Interbank Offered Rate swap rate, U.S. Treasury debt interest rates, and the OIS founded on the Fed Funds Effective Rate as benchmark rates allowed for hedge accounting.

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Credit Loss Standard Effective Date Delayed for Community Banks and Credit Unions

An upcoming clarification to the Financial Accounting Standards Board’s (“FASB”) credit loss standard ensures that credit unions and small banks will get an extra year to implement Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326). By a unanimous vote on October 24, the FASB confirmed several amendments under Proposed ASU No. 2018-270, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The proposed changes include merging the implementation dates for private companies’ annual financial statements and their interim financial statements. Private companies must apply the standard for fiscal years, as well as interim periods within such years, starting. Read More.

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Software Company Lists Mistakes to Avoid When Implementing Leases Standard

LeaseCrunch, an accounting software company specializing in helping clients with the Financial Accounting Standards Board’s (“FASB”) lease accounting standard, has highlighted the five mistakes companies are making when implementing FASB Accounting Standards Codification (“ASC”) Topic 842, Leases. Some of the mistakes involve not setting aside enough time to analyze real estate leases, overlooking hidden leases, and being unaware of the impact the standard will have on business. Visit the LeaseCrunch website for more on advice on implementing FASB ASC 842. In addition, Cherry Bekaert has selected LeaseCrunch as the software platform to use for assisting clients transitioning to the new lease accounting standard. Learn more in the official press release.

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Trade Group Asks Federal Regulators to Delay Credit Loss Standard

Months after the banks and trade groups called for additional time to implement the Financial Accounting Standards Board’s (“FASB”) credit loss standard , the Bank Policy Institute wants federal regulators to postpone the most significant change to bank accounting in decades. In a letter to the Financial Stability Oversight Council (“FSOC”), the trade group warned that the financial system could be at risk due to Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Bank Policy Institute, which represents several large U.S. banks, said implementing the FASB’s current expected credit loss model could undercut financial stability in a recession or financial crisis. The group believes ASU No. 2016-13. Read More.

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