The scope of ASC 946-605 is defined as "all . Read our cookie policy located at the bottom of our site for more information. hbbd```b``@$dLm D2hE\lU0 X2W@Nt $ Xmg` BC14. As described in paragraph 24(b) of Concepts Statement No. :IU$E78'a1=-WArH}N4 .n4[\LGeq7:.q?qSzh05r(DX`q aE!qB! This was consistent with comments from respondents who stated that providing a year for implementation would provide entities that have extensive collaborative arrangements with adequate time to review their contracts. ASC 825-10 notes that it provides "provide guidance on credit losses on financial instruments with off-balance-sheet credit risk and certain disclosures about financial instruments." Guidance is also included on the fair value option, including: Also, the consideration is not a reimbursement of specific, incremental, and identifiable costs incurred by FSP Corp to sell the vendors products. The Board also acknowledged the need to clarify the items in the agenda request on a timely basis given the effective date of Topic 606. For asset acquisitions in which some or all of the consideration transferred consists of noncash assets, liabilities incurred to the seller, or equity interests issued to the seller, reporting entities should first determine whether the transaction is within the scope of other US GAAP. 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. 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. 0 An entity-specific value (referred to as an entity-specific measurement in FASB Concepts Statement No. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. The amendments improve comparability by allowing the presentation of the units of account in collaborative arrangements that are within the scope of Topic 606 together with revenue accounted for under Topic 606. PwC. ASC 705 Cost of Sales and Services. The guidance also states: A counterparty to the contract would not be a customer if, for example, the counterparty has contracted with the entity to participate in an activity or process in which the parties to the contract share in the risks and benefits that result from the activity or process (such as developing an asset in a collaboration arrangement) rather than to obtain the output of the entitys ordinary activities. Company A has previously made an accounting policy election to analogize to the business combinations guidance and measure noncontrolling interests at fair value on the date of acquisition. Obligations of the acquirer to transfer additional assets or equity interests based only upon the passage of time do not represent contingent consideration and instead may represent seller financing. A qualitative assessment will, in some cases, be conclusive in determining that the estimated cash flows of the entity are expected to significantly change as a result of the exchange. The FASB is issuing this Update to clarify the interaction between Topic 808, Collaborative Arrangements, and Topic 606, Revenue from Contracts with Customers. The reseller is subject to an agency relationship with the vendor, whether expressed or implied, in the sales incentive transaction between the vendor and the consumer. Consider removing one of your current favorites in order to to add a new one. FSP Corp enters into a supplier agreement with Toy Company to purchase board games to sell through its website. Some stakeholders raised concerns that the guidance in Update 2014-09 appears to be inconsistent with language included in the basis for conclusions of that Update. Please seewww.pwc.com/structurefor further details. BC31. For transactions involving nonmonetary consideration within the scope of Topic 845, an acquirer must first determine if any of the conditions in paragraph 845-10-30-3 apply. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. 392 0 obj <> endobj xWMk@(H$PhjCn[=wVKil1zO3o0kpu=hl`G?gsi@0(zY}9"3L-3BgR)Obzq7 H!H\kAT$ e`ecpD'p \Me1%4Lq%,S!?71c(Qdf(s%>L BD`RV. 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. It has also been updated to further enhance and clarify our interpretive guidance in several areas. Please see www.pwc.com/structure for further details. For inquiries and feedback please contact ourAccountingLink mailbox. However, the basis for conclusions of Update 2014-09 explains that transactions with partners or participants in a collaborative arrangement can be within the scope of Topic 606 if the counterparty meets the definition of a customer for some or all parts of the arrangement. The classification of insurance proceeds in the income statement depends on the nature of the insurance claim. If the consideration transferred is in the form of nonfinancial or in substance nonfinancial assets within the scope of. The Board agreed that the amendments will benefit users by reducing diversity in practice by clarifying that certain transactions between collaborative arrangement participants should be accounted for in accordance with the guidance in Topic 606 and by clarifying certain presentation requirements. BC28. Company A would also recognize the noncontrolling interest at its acquisition date fair value of $1 million. It specifically addresses the accounting for modifications of contracts within the scope of Topics 310 on receivables, 470 on debt, and 840 and 842 on leases and Subtopic 815-15 on . The Board rejected including within the scope of this project collaborative-type arrangements structured in a separate legal entity. endstream endobj startxref PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. If it is determined that the transaction has commercial substance, the exchange would be measured at fair value, rather than at the entity-specific value. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, Property, plant, equipment and other assets, {{favoriteList.country}} {{favoriteList.content}}, follow the guidance for business combinations and measure NCI at fair value on the date of acquisition in accordance with. In this case, classification of the amortization for the patent in costs of sales (or as an inventory cost that is eventually recorded as cost of sales) may be most consistent with the nature of the asset. An exchange with another entity (reciprocal transfer) that involves principally nonmonetary assets or liabilities. Using Q&As and examples, this new guide explains in detail the accounting for general employee compensation, nonretirement postemployment benefits, retirement benefits and employee stock ownership plans (ESOPs). In the period in which a collaborative arrangement is entered into (which may be an interim period) and all annual periods thereafter, a participant to a collaborative arrangement shall disclose all of the following: Information related to individually significant collaborative arrangements shall be disclosed separately. hb```[@(q$(^uJ=-m The Board also did not address the accounting for nonrevenue transactions between collaborative arrangement participants. The Board noted that current guidance allows an entity to evaluate the terms of a collaborative arrangement to determine how best to account for and present those transactions. Before the issuance of the amendments in this Update, an entity was not precluded from presenting payments received in a collaborative arrangement that are not within the scope of other Topics as revenue. The incentive can be tendered by a consumer at resellers that accept manufacturers incentives in partial payment of the price charged by the reseller for the vendor's product. BC6. BC15. Q+ For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. It includes reasons for accepting certain approaches and rejecting others. 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. hb```yl9B h1_4'n4PK7C[u9!+m{e:v!|xmaDqI"JFD+HsC%Vc1@pf@p!! For example, the depreciation of a manufacturers factory and production equipment would likely be considered fixed overhead and capitalized as part of inventory costs, while the depreciation of corporate headquarters would typically be considered part of general and administrative expense. 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. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. All rights reserved. The Board concluded that certain transactions between collaborative arrangement participants that are unrelated to sales to third parties (that is, related to developing an asset rather than selling a completed product) could result in revenue under Topic 606 consistent with paragraph BC55 of Update 2014-09. This content is copyright protected. How do you move long-term value creation from ambition to action. The Board clarified that a contract that is not completed in the context of those expedients, as written in paragraph 808-10-65-2(e), refers to an arrangement for which all (or substantially all) of the revenue and expenses were recognized in accordance with guidance that was in effect before the date of initial application. This edition of On the Radar offers guidance for translating the accounts of foreign entities as advised under ASC 830, otherwise known as the "functional . PK ;bVoa, mimetypeapplication/epub+zipPK ;bV2[ META-INF/container.xmlM OAX LE7CJHHH o/t/;y 9:B- . We are aware of diversity in practice regarding the subsequent treatment of the income statement effect of changes to the cost basis of the acquired assets. BC35. Add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. 1368 0 obj <> endobj ASC 825 comprises two Subtopics, below is an overview of each Subtopic. If the latter, some respondents disagreed because it would negatively affect performance measures that provide users with useful information. The Board decided not to add additional examples or additional aspects to the existing examples because doing so would have been beyond the projects objective and scope. ASC 946-10 notes that the the Topic "only provides incremental industry-specific guidance for the entities that meet the assessment of investment company status" described in ASC 946-10-15-4 through 15-9. An entity may elect to apply the amendments in this Update retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606. 1434 0 obj <>stream 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. Those areas also were identified in the staffs research as areas for which the lack of guidance was resulting in diversity in practice. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, {{favoriteList.country}} {{favoriteList.content}}, The accounting policy selected for reporting advertising, indicating whether such costs are expensed as incurred, or the first time the advertising takes place, The total amount charged to advertising expense for each period an income statement is presented, Information about the nature and purpose of its collaborative arrangements, Its rights and obligations under the collaborative arrangements, The accounting policy for collaborative arrangements in accordance with Topic 235. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. . Some respondents requested that the Board provide additional guidance on how to determine whether a collaborative arrangement participant is a customer. 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. endobj endstream endobj 1376 0 obj <>stream <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 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. An entity may elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in Topic 606. 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. Water Company provides FSP Corp with $10,000 to ensure that its products receive prominent placement on store shelves (that is, it pays a slotting fee). Insight. The Board acknowledged that entities currently use judgment to determine whether a transaction should be presented in the broader revenue category and that its intent was not to change that practice. The guidance in Topic 808 originated from EITF Issue No. The Board concluded that the expected benefits of making the targeted improvements justify the expected costs. FSP Corp should recognize the consideration received as a reduction of the purchase price of the water bottles because it has not provided a distinct good or service to Water Company in exchange for this fee. Some variation in production levels from period to period is expected and establishes the range of normal capacity. Company A should recognize and measure the acquired patent at a total cost of $10.1 million, consisting of (1) $9 million of cash consideration transferred, (2) $100,000 of direct transaction costs, and (3) $1 million fair value of noncontrolling interest. % Those respondents requested that the Board clarify whether it intended to preclude the aggregation of other sources of revenue from collaborative arrangements with revenue that is within the scope of Topic 606 or to more generally preclude revenue presentation. ?oTku>vbxxJkx The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. %R&"(kXDe-ERBlQ5V`D!%|ekHd?iwQKjEN,DBJuK,*cn 9 Cybersecurity, strategy, risk, compliance and resilience, Value creation, preservation and recovery, Explore Transactions and corporate finance, Climate change and sustainability services, Strategy, transaction and transformation consulting, Real estate, hospitality and construction, How blockchain helped a gaming platform become a game changer, How to use IoT and data to transform the economics of a sport, M&A strategy helped a leading Nordic SaaS business grow. All rights reserved. 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. BC22. The agreement also includes payment of an advertising allowance of $1,000 to FSP Corp by Toy Company. H\n0E See. The agenda request asked that the Board consider providing recognition and measurement guidance for nonrevenue transactions between collaborative arrangement participants. endstream endobj 1375 0 obj <>stream 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. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Regina Croucher. 449 0 obj <>stream Therefore, the Board decided not to provide recognition and measurement guidance for nonrevenue transactions in a collaborative arrangement. How should the $1,000 advertising allowance be recorded by FSP Corp? In both scenarios, the reseller generally has no control over which consumers receive or choose to apply these incentives. The observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan may change from one reporting period to the next. <> FSP Corp enters into a supply contract with Water Company to purchase water bottles for $100,000. The configuration of future cash flows is composed of the risk, timing, and amount of the cash flows. BC37. Meet other stamp collectors interested in Poland stamps. By continuing to browse this site, you consent to the use of cookies. 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