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Financial Reporting and Regulatory Update

Second Quarter 2018

ASU Effective Dates Checklist

Public Business Entities (PBEs)

Accounting Standards Update (ASU)

Effective Dates for Dec. 31 Year-End PBEs

Early Adoption

Tax Reform – SEC Accounting and Disclosure Guidance (ASU 2018-05)

Codifies the SEC’s SAB 118, which provides guidance on accounting for income tax effects of the Tax Cuts and Jobs Act (H.R. 1). Provisional amounts should be recorded for tax effects that are incomplete and can be reasonably estimated at the end of the reporting period, and disclosure should accompany the incomplete tax effects.

Dec. 22, 2017 – enactment of H.R. 1, included in the Dec. 31, 2017, annual financial statements Not applicable

Rescission of Obsolete Deferred Tax Guidance for Financial Institutions (ASU 2018-06)

Supersedes guidance that originated from the Office of the Comptroller of the Currency’s (OCC’s) Banking Circular 202, “Accounting for Net Deferred Tax Charges.” Because the OCC previously rescinded this guidance, it is no longer relevant.

Upon issuance, May 7, 2018 Not applicable

Revenue Recognition (ASU 2014-09)

For all entities, the transaction- and industry-specific recognition methods are eliminated and revenue is recognized by applying a defined principles-based approach.

Clarifying standards:

ASU 2015-14 – Deferral of Effective Date

ASU 2016-08 – Principal Versus Agent Considerations (Gross Versus Net Reporting)

ASU 2016-10 – Identifying Performance Obligations and Licensing

ASU 2016-11 – Rescission of Certain SEC Guidance in Topic 605 (Staff Announcements at March 3, 2016, EITF Meeting)

ASU 2016-12 – Narrow-Scope Improvements and Practical Expedients

ASU 2016-20 – Technical Corrections and Improvements

ASU 2017-14 – Rescission of SEC SAB Topics 8 and 13 and bill-and-hold guidance; revision of SAB Topic 11.A and SEC guidance for certain vaccine manufacturers

March 31, 2018 [1] Permitted only as of annual periods beginning after Dec. 15, 2016, including interims within

Derecognition and Partial Sales of Nonfinancial Assets (ASU 2017-05)

Primarily applies to the real estate industry but can impact other entities. Clarifies the scope of Subtopic 610-20 by defining an “in substance nonfinancial asset,” and provides guidance on partial sales, such as when an entity retains an equity interest in the entity that owns the transferred nonfinancial assets.

March 31, 2018, consistent with ASU 2014-09 Permitted only as of annual periods beginning after Dec. 15, 2016, including interims within

Service Concession Arrangements for Operators of Public Infrastructure (ASU 2017-10)

In all service concession arrangements between a public sector entity and the operator of the public sector entity’s infrastructure, the public sector entity (or the grantor) should be identified as the customer.

March 31, 2018

(unless ASU 2014- 09 was previously adopted)

Permitted, including in an interim period

Recognition and Measurement (ASU 2016-01)

Applies to the classification and measurement of financial instruments. Removes the AFS category for equities. Equities (excluding equity method and consolidated investments) will be carried at fair value; however, the changes will run through the income statement rather than OCI. For PBEs, requires the use of exit pricing in fair value disclosure for instruments carried at amortized cost.

Clarifying standards:

ASU 2018-03 – Clarifications for equity securities without a readily determinable fair value and FVO liabilities

ASU 2018-04 – (SAB 117) Rescission of SEC guidance on AFS equities

March 31, 2018

For ASU 2018-03, Sept. 30, 2018

Not permitted, except for two provisions

For ASU 2018-03, permitted, including in an interim period, if ASU 2016-01 has been adopted

Breakage for Prepaid Cards (ASU 2016-04)

Applies to prepaid stored-value products that are redeemable for monetary values of goods or services but also may be redeemable for cash, such as certain prepaid gift cards, prepaid telecommunication cards, and traveler’s checks.

March 31, 2018 Permitted, including in an interim period

Statement of Cash Flows: Certain Clarifications (ASU 2016-15)

Provides guidance on how eight specific cash flows should be classified in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of zerocoupon bonds, contingent consideration payments, insurance settlement proceeds, company- owned life insurance (COLI) policy settlements and premiums, equity method investee distributions, beneficial interests in securitization transactions, and predominance principle for receipts and payments.

March 31, 2018 Permitted, including in an interim period

Income Taxes for Intra-Entity Asset Transfers (ASU 2016-16)

Applies to asset transfers between legal entities, including related parties (e.g., bank and investment subsidiary); transferor recognizes the current and deferred tax effects when the transfers occur.

March 31, 2018 Permitted as of the beginning of an annual period for which financial statements have not been issued

Statement of Cash Flows: Restricted Cash (ASU 2016-18)

Requires that restricted cash and cash equivalents be presented in total cash and cash equivalents in the statement of cash flows, and the nature of restrictions on restricted cash and cash equivalents be disclosed.

March 31, 2018 Permitted, including in an interim period

Definition of a Business (ASU 2017-01)

Applies to the analysis of whether an asset or business is acquired (which determines whether goodwill is recognized), as well as asset derecognition and business deconsolidation transactions.

March 31, 2018 Permitted for certain transactions

Presentation of Net Periodic Pension and Postretirement Benefit Costs (ASU 2017-07)

Rather than reporting pension expense as a net amount, the service cost component will be presented consistent with similar compensation for the same employees, and the other components will be separately presented in the income statement.

March 31, 2018 Permitted as of the beginning of an annual period, in the first interim period

Share-Based Payment Modification Accounting (ASU 2017-09)

Requires modification accounting when an award’s fair value, vesting provisions, or classification changes subsequent to a modification of the award.

March 31, 2018 Permitted, including in an interim period

Leases (ASU 2016-02)

Revises recognition and measurement for lease contracts by lessors and lessees; operating leases are recorded on the balance sheet for lessees. Replaces Topic 840 with Topic 842.

Clarifying standards:

ASU 2018-01 – Provides a practical expedient in transition to not evaluate existing or expired land easements under Topic 842 that were not previously accounted for as leases under Topic 840.

March 31, 2019 [2] Permitted

Premium Amortization on Purchased Callable Debt (ASU 2017-08)

Shortens the amortization period for premiums on purchased callable debt securities to the earliest call date, instead of to the maturity date.

March 31, 2019 Permitted, including in an interim period

Financial Instruments With Down-Round Features (Part I) and Scope Exception for Certain Mandatorily Redeemable Financial Instruments (Part II) (ASU 2017-11)

Part I – Simplifies the accounting for certain financial instruments with down-round features by eliminating the requirement to consider the down-round feature in the liability or equity classification determination.

For entities that present earnings per share (EPS), requires the effect of the down-round feature in a warrant or other freestanding equity-classified instrument to be presented as a dividend and an adjustment to EPS when it is triggered. Regardless of whether the entity presents EPS, requires the effect of the down-round feature in a convertible instrument such as debt or preferred stock to follow existing guidance for contingent beneficial conversion features and be presented as a discount to the convertible instrument with an offsetting credit to paid-in capital when it is triggered.

Part II – Changes the indefinite deferral available to private companies with mandatorily redeemable financial instruments and certain noncontrolling interests to a scope exception, which does not have an accounting effect.

March 31, 2019 Permitted, including in an interim period

Hedging Activities (ASU 2017-12)

Expands the nonfinancial and financial risk components that can qualify for hedge accounting and simplifies financial reporting for hedging activities.

March 31, 2019 Permitted, including in an interim period

Certain Deferred Taxes for Steamship Entities (ASU 2017-15)

Requires steamship entities to recognize any remaining deferred taxes on certain statutory reserve deposits in accordance with Topic 740.

March 31, 2019 Permitted, including in an interim period

Tax Reform – Reclassification of Stranded Tax Effects in AOCI (ASU 2018-02)

If elected, an entity may reclassify stranded tax effects in AOCI specifically affected by the Tax Cuts and Jobs Act from AOCI to retained earnings, instead of recognizing those effects in earnings.

March 31, 2019 Permitted, including in an interim period

Nonemployee Stock Compensation Simplifications (ASU 2018-07)

Aligns the accounting guidance for nonemployee stock payments with the guidance for employee stock compensation in ASC Topic 718.

March 31, 2019 Permitted, including in an interim period, but no earlier than the adoption of Topic 606

Contributions Received and Made for Not-for-Profit Entities (ASU 2018-08)

Improves the guidance on contributions and exchange transactions. Although the ASU primarily impacts not-for-profit entities, it applies to all entities, including business entities, that receive or make contributions of cash and other assets.

March 31, 2019 (see the ASU for non-calendar yearend effective dates because they vary for contributions received and contributions made) Permitted

Goodwill Impairment Testing (ASU 2017-04)

Removes step two – the requirement to perform a hypothetical purchase price allocation when the carrying value of a reporting unit exceeds its fair value – of the goodwill impairment test.

For SEC filers, tests performed on or after Jan. 1, 2020

For PBEs that are not SEC filers, tests performed on or after Jan. 1, 2021

Permitted for interim or annual goodwill impairment tests performed on testing dates on or after Jan. 1, 2017

Credit Losses (ASU 2016-13)

Replaces the incurred loss model with the current expected credit loss (CECL) model for financial assets, including trade receivables, debt securities, and loan receivables.

For SEC filers, March 31, 2020

For PBEs that are not SEC filers, March 31, 2021

Permitted as of the fiscal years beginning after Dec. 15, 2018, including interim periods within
 
[1] As codified in ASU 2017-13, in an SEC staff announcement at the July 20, 2017, EITF meeting, specifically related to PBEs that qualify as a PBE solely due to a requirement to include or the inclusion of its financial statements or financial information in another entity’s SEC filing (“certain PBEs”), the SEC stated that it will allow certain PBEs to elect to apply the non-PBE effective dates for the revenue recognition and lease accounting standards only. For certain PBEs, the revenue recognition guidance is effective for Dec. 31, 2019, annual financial statements for calendar year-end entities.
 
[2] As codified in ASU 2017-13, in an SEC staff announcement at the July 20, 2017, EITF meeting, specifically related to PBEs that qualify as a PBE solely due to a requirement to include or the inclusion of its financial statements or financial information in another entity’s SEC filing (“certain PBEs”), the SEC stated that it will allow certain PBEs to elect to apply the non-PBE effective dates for the revenue recognition and lease accounting standards only. For certain PBEs, the lease accounting standard is effective for Dec. 31, 2020, annual financial statements for calendar year-end entities.