The Board decided that the amendments in this Update should be effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Reporting entities may have flexibility as to how they present bad debt expense (i.e., expense associated with changes in the provision for receivables). Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. endobj Therefore, aligning the financial reporting requirements with Topic 606 is the most meaningful to users of financial statements. For all other entities, consistent with the Private Company Decision-Making Framework, the Board decided that the amendments in this Update should be effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Please refer to your advisors for specific advice. By continuing to browse this site, you consent to the use of cookies. PwC. Other respondents requested that the Board clarify whether transactions directly related to sales to third parties are within the scope of Topic 606. $F*NdOz=fv0c.5nU2.C8se6y]xw At various stages in developing the amendments in this Update, the Board considered the projects scope. [0p?'7l:u# YKD~2.o},P[ V p:dN#|eA^{k#l[0%8gT+ The issuance of Update 2014-09 on revenue from contracts with customers heightened the need for clarity on whether the guidance in Update 2014-09 applies to collaborative arrangements. Company A has previously made an accounting policy election to analogize to the business combinations guidance in remeasuring previously held equity interests in an asset acquisition. The definitions of unusual nature and infrequency of occurrence are included in the FASB Codification Master Glossary. Various Printing options, including printer-friendly utility for viewing . Because determining the unit of account is critical to the accounting in a collaborative arrangement, the Board decided to provide unit-of-account guidance in Topic 808 and align that guidance with the guidance in Topic 606 for distinct goods or services. The amendments in this Update are not intended to address transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant and, therefore, do not result in changes to the presentation of those transactions. Company A would also recognize the noncontrolling interest at its acquisition date fair value of $1 million. The Board clarified that its intent was to preclude presentation together with revenue accounted for under Topic 606 for those transactions outside the scope of Topic 606. Some reporting entities choose to report all depreciation and amortization directly charged to earnings as a separate line item in the statement of operations rather than include it in the related line items by function (e.g., cost of sales, selling and marketing, general and administrative). 2.3 Initial measurement (asset acquisitions). BC6. On the Radar: Foreign currency accounting. Subsequentchanges in the recorded amount of contingent consideration should generally be recognized as an adjustment to the cost basis of the acquired assets, by analogy to. Follow along as we demonstrate how to use the site. The Board also did not address the accounting for nonrevenue transactions between collaborative arrangement participants. We believe the acquirer in an asset acquisition should choose one of the following accounting policy elections on the acquisition date: In the absence of guidance for previously held equity interests in an asset acquisition, other measurement considerations may be acceptable (e.g., iterative equation). BC18. The objective of financial reporting is to provide information that is useful to present and potential investors, creditors, donors, and other capital market participants in making rational investment, credit, and similar resource allocation decisions. That model intentionally left substantial room for judgment to allow for different accounting outcomes for a wide range of arrangements that had significant differences in economics. The Board decided to include guidance in Topic 808 to address the issue raised in the agenda request about the apparent inconsistency between Topic 606s scope and the discussion included in the basis for conclusions of Update 2014-09. We generally believe the subsequent amortization of a favorable or unfavorable revenue contract should be recognized within the income statement as contra-revenue or revenue, respectively. We generally believe the depreciation or amortization of these assets should be recognized as a cumulative catch up adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement. Periodicals postage paid at Norwalk, CT and at additional mailing offices. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. Regina Croucher. Additionally, some respondents asked for examples that would have included provisions more representative of collaborative arrangements seen in practice, such as upfront payments and licenses. In addition, the Board clarified that for a unit of account that is within the scope of Topic 606, an entity is required to apply all the accounting requirements in Topic 606 to that unit of account, including the recognition, measurement, presentation, and disclosure requirements. Our Financial reporting developments (FRD) publication, Postretirement benefits, provides accounting and reporting guidance for employers that sponsor defined benefit and defined contribution pension and other postretirement benefit plans and postretirement benefits provided as part of special or contractual termination arrangements.The FRD provides an overview of the principles of . Company A acquires the remaining 75% interest in the legal entity for $1.5 million in cash; there were no direct transaction costs incurred. Welcome to the Deloitte Accounting Research Tool (DART)! Are you still working? An exchange with another entity (reciprocal transfer) that involves principally nonmonetary assets or liabilities. Those areas also were identified in the staffs research as areas for which the lack of guidance was resulting in diversity in practice. Require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. This content is copyright protected. On April 26, 2018, the FASB issued a proposed Accounting Standards Update. (2022).". " .S01E04. . For additional copies of this Accounting Standards Update and information on applicable prices and discount rates contact: FINANCIAL ACCOUNTING SERIES (ISSN 0885-9051) is published monthly with the exception of May and October by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. A creditor that measures impairment based on the present value of expected future cash flows is permitted to report the entire change in present value as bad-debt expense. ASC 848-20 notes that it "provides optional expedients for contract modifications undertaken because of reference rate reform. Added unit-of-account guidance to Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) limited to when an entity is assessing the scope of Topic 606. Some respondents requested that the Board provide additional guidance on how to determine whether a collaborative arrangement participant is a customer. Impairments of long-lived assets may be included within operating income based on the function of the associated asset or presented separately in the income statement. Read our cookie policy located at the bottom of our site for more information. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. endstream endobj 1375 0 obj <>stream <> %%EOF This decision ultimately aligns with the accounting model in Topic 808, which is a residual model similar to Topic 606, indicating that an entity should first look to other guidance for separation. Total depreciation and amortization of long-lived assets is required to be disclosed in a reporting entitys financial statements. 2019 - 2023 PwC. Buy and sell stamps from USSR. Disclosure shall be made in the financial statements of the total research and development costs charged to expense in each period for which an income statement is presented. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. endobj Classification of amortization of the intangible asset in selling, general, and administrative expense may be most consistent with the nature of the asset because the intangible asset is not typically associated with providing the service to customers. H\n0E Disclosure of unusual amounts, net of applicable income taxes, and their earnings per share effect, net of applicable income taxes, is permissible only in the footnotes. However, the Board decided that aligning those models would require a broader, longer term effort that would extend beyond the issues raised in the agenda request. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. Follow along as we demonstrate how to use the site. See more on AccountingLink Subscribe to AccountingLink updates, Do Not Sell or Share My Personal Information. When an entity's financial statements include foreign operations, it must consolidate those foreign entities and present them as if they were one. Alternatively, a creditor may report the change in present value attributable to the passage of time as interest income. FSP Corp is required to provide Toy Company with the associated proof of payment for advertisements that feature Toy Companys products. ASC 946-605 contains its own scope that is separate from the other Subtopics of ASC 946. Welcome to Viewpoint, the new platform that replaces Inform. %PDF-1.5 % 1 0 obj /Type /Catalog /Pages 2 0 R /OutputIntents [ 6143 0 R ] /PageLabels /Nums [ 0 >> 16 /S /D /St 1 >> 875 >> ] >> /ViewerPreferences /FitWindow true /DisplayDocTitle true >> /Lang (eng) /MarkInfo /Marked true >> /StructTreeRoot 6144 0 R /Metadata 8802 0 R >> endobj 2 0 obj /Type /Pages /Kids [ 9 0 R 11 0 R 13 0 R 15 0 R 17 0 R 19 0 R 21 0 R 23 0 R 25 0 R 27 0 R 29 0 R . See paragraphs BC22BC26 for the Boards basis for that decision. BC21. USSR stamp catalogue. EY | Assurance | Consulting | Strategy and Transactions | Tax. The configuration (risk, timing, and amount) of the future cash flows of the asset(s) received differs significantly from the configuration of the future cash flows of the asset(s) transferred. Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 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