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SEC Trends & Developments - Spring 2013 - Accounting Standards Update

Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASU 2013-01)

The objective of this ASU is to clarify the scope of the offsetting disclosures previously introduced in ASU 2011-11, Balance Sheet Topic (210): Disclosures about Offsetting Assets and Liabilities. The amendment limits the scope of ASU 2011-11 to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement. The effective date for this amendment is the same as the effective date of ASU 2011-11. Both ASUs will be effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods, and must be applied retrospectively to all comparative periods presented.
 
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02)

This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendment requires entities to disclose amounts that are reclassified out of accumulated other comprehensive income (AOCI) by components. In addition, for amounts that are reclassified out of AOCI in their entirety, entities are required to present the impact on the respective line items of net income, either on the face of the statement where net income is presented or in the notes, in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted.

Financial Instruments (Topic 825): Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities (ASU 2013-03)

The amendments in this ASU clarify that the requirement to disclose “the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3),” required by ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position but for which fair value is disclosed. The amendments are effective immediately upon issuance.


Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force) (ASU 2013-04)

The guidance in this ASU requires an entity to measure obligations resulting from joint and several liability arrangements when the total amount of the obligation is fixed at the reporting date, as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors; and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments also require an entity to disclose the nature and amount of the obligation as well as other information about those obligations. For public entities, this ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014. Retrospective application is required for all prior periods presented for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity’s fiscal year of adoption. An entity may elect to use hindsight for the comparative periods (if it changed its accounting as a result of adopting the amendments in this Update) and should disclose that fact. Early adoption is permitted.

Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (ASU 2013-05)

This ASU clarifies that when a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity, the cumulative translation adjustment (CTA) should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For sales of an equity method investment that is a foreign entity, a pro rata portion of CTA attributable to the investment should be recognized in earnings upon sale of the investment. When an entity sells either a part or all of its investment in a consolidated foreign entity, CTA should be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. CTA would also be recognized in earnings in a business combination achieved in stages. The ASU includes a flowchart to illustrate all the derecognition events included in the guidance. For public entities, the amendments in this ASU are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. Prior periods should not be adjusted. Early adoption is permitted.

On the Horizon

The FASB and IASB (the Boards) have reached tentative decisions on certain revenue recognition disclosure issues. The Boards also reached tentative decisions on transition, effective date and early application. The tentative transition guidance would be retrospective with an enhanced practical expedient and modified presentation. For contracts completed before the date of initial application, an entity may not restate completed contracts irrespective of whether they begin and end within the same reporting period. However, entities that choose to apply the expanded practical expedient should not restate comparative periods in its financial statements. The revenue recognition guidance would be effective for annual periods beginning on or after January 1, 2017. Early application would not be permitted.

SEC Trends & Developments - Spring 2013 - Issue 

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