Trying to find an update on recent FASB standard setting? Stop looking and start listening. In this episode of our podcast series, PwC's Heather Horn, David Schmid and Jim Gazley examine recently finalized accounting standards, highlighting the key accounting and financial reporting developments. Among the topics covered in this podcast are the new guidance related to certain elements of tax reform; amendments to the new revenue and leases standards; and technical corrections to the financial instruments guidance. We also address a few SEC staff accounting bulletins. And if you want a say in future standard setting, we highlight recently proposed guidance that companies may want to weigh in on by writing a response to the related exposure draft.
| Duration 22:16
The FASB issued some new guidance in February related to stranded tax effects caused by the newly-enacted US Tax Cuts and Jobs Act. The new guidance permits companies to make a reclass entry to remove that stranded tax effect from AOCI to retained earnings. You can read our In depth on the FASB final standard permits reclass of stranded tax effects relating to US tax reform for additional insights. In March, the FASB also issued another tax reform related amendment -- this one codifying SEC Staff Accounting Bulletin No. 118, or SAB 118. SAB 118 addresses the application of US GAAP in situations when a company does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. See PwC’s In brief for more information on the new SEC Staff guidance for US tax reform.
The FASB also codified two other SEC Staff Accounting Bulletins.
The FASB also codified an announcement made by the SEC Observer at the July 20, 2017 EITF meeting. The SEC Observer said that the SEC would not object if a company that meets the definition of a PBE solely because its financial statements (or financial information) is included in another entity’s filing with the SEC adopts the new revenue and leases standards using the effective dates for private companies. Read PwC’s EITF Observer for a summary of their deliberations on accounting for implementation costs in a cloud computing arrangement.
In January, the FASB issued an amendment to the new leasing standard related to easements. The guidance adds a transition practical expedient to allow companies to not assess whether any expired or existing land easements are, or contain, leases if they were not previously accounted for as leases under the old leasing guidance. Instead, the company can continue to apply its existing accounting policies to historical easements. This optional practical expedient would effectively grandfather a company’s prior accounting. For more information tune into Episode 33 of our podcast series; Leasing - recent proposals, impairment and subleases.
In February, the FASB issued six amendments to the new recognition and measurement guidance to address questions raised by stakeholders. To learn more, refer to PwC’s In brief: Financial instruments - recognition and measurement: FASB issues amendments.
Finally, there is currently one exposure draft open for comment: customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and disclosures for implementation costs incurred for internal-use software and cloud computing arrangements. It says a customer in a cloud computing arrangement that is accounted for as a service contract would look to the existing guidance on internal-use software to determine which implementation costs to recognize as an asset. Most companies expense a majority of these costs today, so this proposal will likely result in more costs being capitalized in the future. For additional information on the EITF’s consensus-for-exposure on accounting for implementation costs in a cloud computing arrangement, read PwC’s EITF Observer.