More than a decade in the making, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have released a converged standard on revenue recognition. Titled, “Revenue from Contracts with Customers”, the standard is designed to enhance the process of revenue reporting and improve comparability in financial statements among corporations using IFRS and U.S. GAAP. The standard also impacts the sale of nonfinancial assets to noncustomers, such as real estate. In an in-depth interview with Accounting Today, FASB member, Marc Siegel expanded on this example, stating, “Even though you might not be a home builder and…
-
-
Understanding the nature and risk of expected cash flow This discussion summarizes the interrelatedness of the weighted average cost of capital and the weighted average return on assets within the context of a purchase price allocation for financial reporting purposes. Failure to understand this fundamental relationship can lead to inaccurate estimates of value for the acquired assets and, therefore, inaccurate reported asset values and amortization expense on the financial statements of the acquirer. The WACC can be viewed as a weighted average of the required rates of return for the individual assets of the acquired company. The selected intangible asset…
-
FASB has voted to endorse a GAAP alternative to exempt private company lessees from a requirement to consolidate variable interest entities (VIE) in common control leasing arrangements. Initiated by the Private Company Council (PCC), the exemption would be allowed under specific conditions including: Private company lessee and the lessor entity are under common control Private company holds a leasing arrangement with the lessor entity All activity between entities is substantially related to the leasing activity between the lessor and private company Obligations of the lessor that are being guaranteed or collateralized by the private company could, at the inception of…
-
Separability and transferability are key This overview examines intangible assets within business combinations through the lens of FAS 141. Fair value is covered as well as identification and classification protocols.
-
The Black Scholes Model The true value of a stock option is often greater than its intrinsic value. This article takes a theoretical approach to valuation that focuses on the time value of money with the Black-Scholes Option Pricing Model.
-
A help or hinderance? On July 1, 2013, FASB issued exposure drafts calling for public commentary on three proposals that address private company stakeholder concerns. Two proposals involve accounting for identifiable intangible assets and goodwill acquired in business combinations. In this article, Mark Zyla analyzes the proposed changes, including potential concerns, and their far-reaching impact on the industry, as well as private and (in 2014) public companies.
-
In an article titled, “PCC to Ask FASB to Endorse First Private Company GAAP Exceptions”, under the subhead, “Business combinations”, the Journal of Accountancy reveals that the Private Company Council (PCC) approved a proposal to FASB that would allow a private company to elect to amortize goodwill acquired in a business combination on a straight line basis over 10 years or less. The proposal is conditional on the fact that an entity can prove that another useful life is more fitting based on demonstrable facts. The proposal also contains simplification of the impairment test for goodwill. [button link=”http://journalofaccountancy.com/News/20138826.htm” color=”silver”] View…
-
Recently, the FASB issued exposure drafts of Accounting Standards Updates (ASUs) which propose reductions in the cost and complexity of accounting for intangible assets acquired by private companies, as well as subsequent testing for goodwill impairment. The proposed changes in the drafts involve alterations to Accounting Standards Codification (ASC) Topic 85, Business Combinations, and Topic 350, Intanbigles—Goodwill and other. Among the suggested changes to Topic 85 is the proposal that a company involved in a business combination may elect (but would not be required) to recognize only the acquired intangible assets that are the direct result of contractual rights…
-
On the Horizon Offers Two Examples of Appropriate Ways to Apply FASB Guidance. Plus: New Guidance on Reporting Discontinued Operations and Not-for-Profit Entities Grant Thornton recently published a useful article on applying the equity method in its On the Horizon web-based publication, which also notes that the Fair Accounting Standards Board (FASB) has suggested new guidelines for reporting discontinued operations and that the American Institute of CPAs (AICPA) has released its guide on not-for-profit entities.
-
Key Concern is that FASB and IASB Continue Work Towards Common Standard Frank Byrt at Accounting Web reports that The Financial Accounting Standards Board (FASB) voted March 28 to extend the comment deadline for its proposal to improve financial reporting on expected credit losses on loans and other financial assets held by banks, financial institutions, and other public and private organizations, as FASB and the International Accounting Standards Board (IASB) continue to work toward a common standard. The new comment deadline on Proposed Accounting Standards Update, Financial Instruments – Credit Losses (Subtopic 825-15) is May 31, 2013.
-
Private Companies and Nonpublic Not-for-Profits are Exempted from a Particular Fair Value Disclosure as a Result of Recent FASB Amendment The Financial Accounting Standards Board responded quickly to concerns voiced in December to issue an amendment clarifying that private companies and nonpublic not-for-profits are exempted from a particular fair value disclosure. Ken Tysiac at The Journal of Accountancy reports the news:
-
“It’s a Huge Case for the Patent-Law Community.” On One Side: Google, Facebook, Intuit. On the Other? IBM. “Because the patents are often unclear, there’s no way to know whether an infringement claim by a competitor or a troll is legitimate until you’ve spent $8 million in litigation fees,” said Mr. Schruers Ashby Jones in the Wall Street Journal reports this morning that a federal appeals court in Washington, D.C., will hear arguments Friday over a fundamental question that has vexed the technology industry for nearly two decades: When is a piece of software patentable?
-
Royalty Rates in the Life Sciences are Under Increased Scrutiny. But Has That Caused Rates to Decline? Several medical manufacturers were accused of violating federal kickback statutes. Federal enforcement prompted many companies in the industry to review and revise the terms under which they collaborate with and pay healthcare professionals for contributions of time, know-how, and intellectual property. Ed Gold and the Invotex team examine how this has affected royalty rates.
-
Consider Three Types of Private Preferred Stock Transactions, Each with Varying Degrees of Relevance to an Indication of Fair Value: Simple, Strategic, and Tranched Preferred Financing Last year, the AICPA issued guidance on evaluating private transactions with regards to their relevance in estimating the Fair Value of other securities within an enterprise via the back-solve method. The McLean Valuation Services Group recaps that guidance and explains what it should mean in practice. Appraisers need to carefully follow specific criteria and they need to exercise reasonable judgment.
-
The FASB and IASB Don’t Seem to Be Open to Reconsidering Basic Assumptions Behind the “Right-of-Use” Asset. Here’s Why They Should. The attempt to find a single lease accounting model based on recognition of a right-of-use asset has faltered, assert two professionals in Grant Thornton LLP’s National Professional Standards Group. In a new white paper, they suggest a control-based model as an alternative:
-
Some Stakeholders Suggest Improvements to Segment Reporting Information A 1996 accounting standard established to improve the way public companies report financial information about their business segments generally achieves that purpose, although some stakeholders suggest improvements. That was the overall conclusion of the post-implementation review (PIR) of Financial Accounting Standards Board (FASB) Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (codified in Accounting Standards Codification Topic 280, Segment Reporting). The PIR process was established by the Financial Accounting Foundation (FAF) in 2010. The Financial Accounting Foundation elaborates:
-
IFRS Foundation Trustee: Don’t Wave White Flag on Cooperation Global accounting standard setters acknowledge that completion of the convergence projects is unlikely to happen in the near term, but progress can still be made to closely align International Financial Reporting Standards and U.S. GAAP, the Journal of Accountancy reports. Here’s more:
-
Implications of the SEC IFRS Work Plan for Private and Public Issuers; How Slow Adoption May Rewrite GAAP Grant Thornton Audit Services has published a 16-page report providing background and context on IFRS in the United States. The report explores how market forces press the issue, cover SEC final report highlights and reaction to the report, summarizes how some companies are preparing for IFRS today, and offers a set of action steps required to put together a logical, cost-efficient readiness plan:
-
The FASB Lists 29 Different Intangible Asset Categories. Here’s What You Need to Know. Intangible assets have comprised an increasing proportion of the value of assets of most companies in the last decade, Gregory Marsh explains. Often a collection of intangible assets is accounted for as a single asset labeled “goodwill.” Here’s why that sometimes doesn’t make sense.
-
Should Losses Trigger an Immediate Charge or Later Write Down? The Financial Accounting Standards Board (FASB) is engaged in an interesting discussion with the International Accounting Standards Board (IASB) regarding how quickly bad loans need to be recognized by banks. Here’s the essence of the dispute.