Therefore, the Board decided not to provide recognition and measurement guidance for nonrevenue transactions in a collaborative arrangement. See, Some reporting entities present gains or losses resulting from sales of businesses (that do not qualify as discontinued operations) within operating income in a two-step income statement, in accordance with. EY helps clients create long-term value for all stakeholders. Normal capacity refers to a range of production levels. BC10. Effectively, the reseller is acting as the vendors agent when it provides the incentives to end consumers. %%EOF i8 S:HlvSfGHANN#3=b_"Y2WyI1i23"\!`TX@[lY}6QhX1VZ)}k1]-1_|;(vY RQo`e&Z`=Q+~~~J#*p*[lf$EvOdz[?vY .Rmmt(`NNM|_oE~g]`|wqZhBLSo?r|DCImT _WsFl63Z53;IQa7)amgIn/& J_s?P Immediately prior to the acquisition, Company A would remeasure the PHEI to fair value, recognizing a gain on remeasurement of $400,000 ($500,000 acquisition date fair value less carrying value of $100,000). Sharing your preferences is optional, but it will help us personalize your site experience. Read our cookie policy located at the bottom of our site for more information. On April 26, 2018, the FASB issued a proposed Accounting Standards Update. %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 . The amount of monetary assets or liabilities exchanged in an asset acquisition generally provides an objective basis for measuring the fair value of the assets acquired. Consider removing one of your current favorites in order to to add a new one. Foreign currency transaction gains/losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. A nonmonetary exchange shall be measured based on the recorded amount (after reduction, if appropriate, for an indicated impairment of value as discussed in paragraph 360-10-40-4) of the nonmonetary asset(s) relinquished, and not on the fair values of the exchanged assets, if any of the following conditions apply: a. Judgment is required to determine the elements of an arrangement that should be accounted for as part of the exchange transaction and elements that should be accounted for separately. If a portion of the consideration transferred is for the settlement of a preexisting relationship, the consideration transferred would be allocated to the asset acquisition and settlement of the litigation on a relative fair value basis, since the preexisting relationship is noncontractual. 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. EY updates FRD on income taxes EY has updated its Financial reporting developments (FRD) publication on income taxes. h-$LSB@o,M!/EvKXSB>k86;A. Poland stamp catalogue. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. However, if they are material, they should be presented separately on the face of the income statement as an operating expense. The Board also considered whether to provide guidance for two additional areas that were raised in the agenda request: (a) unit of account and (b) recognition and measurement guidance for transactions not within the scope of the revenue guidance (that is, nonrevenue transactions). In determining when transactions between collaborative arrangement participants under Topic 808 are within the scope of the revenue guidance in Topic 606, the Board did not intend to develop new or different requirements from the requirements of Topic 606. Those entities are analogizing to those Topics either because the scope of the revenue guidance is not directly applicable or because the interaction between Topic 808 and those Topics is unclear. <> Some entities view all transactions between the collaborative arrangement participants as a single unit of account because of their continuing obligation to participate. 2.3 Initial measurement (asset acquisitions). BC34. However, because inventory is an output of an entity's ordinary activities, we believe that the exchange of inventory for noncash consideration with a counterparty that is not a customer will continue to be accounted for under . The agreement also includes payment of an advertising allowance of $1,000 to FSP Corp by Toy Company. It is for your own use only - do not redistribute. Cross Reference report and archive to locate and access legacy standards. However, the Board continues to believe that the principles in Topic 606 might be appropriate to apply to a collaborative arrangement by analogy even if the counterparty is not considered a customer, provided there is no other more relevant authoritative guidance. Consideration transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value basis. The Board concluded that the expected benefits of making the targeted improvements justify the expected costs. The following summarizes the Boards considerations in reaching the conclusions in this Update. The Board noted that the amendments may, in certain situations, reduce cost by clarifying guidance that various entities and accounting firms indicated is unclear. Advertising costs are generally presented as part of selling, general, and administrative (SG&A) expenses in a reporting entitys income statement. Click below to also try our advanced search: Advanced Search. Toy Company has also committed to reimburse 50% of FSP Corps advertising costs related to toys purchased from Toy Company. BC28. s\A0W+d g"p&g"p&xc&>>>>>>J^QW+u_W+sSMs=*zTQGe=z4o7o7Y*+m}RsF.0x Property, plant, equipment and other assets. See, Company name must be at least two characters long. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. Because of the diverse views and various issues raised, the Board concluded that it would have been difficult to develop a one-size-fits-all accounting model for the various types of collaborative arrangements, particularly within the context of this project on targeted improvements for collaborative arrangements. Buy and sell stamps from Bulgaria. The amount of monetary assets or liabilities exchanged generally provides an objective basis for measuring the cost of nonmonetary assets or services received by an entity as well as for measuring gain or loss on nonmonetary assets transferred from an entity. Consequently, overriding an entitys ability to consider the specific terms of its arrangements and the nature of its ordinary activities and precluding revenue recognition broadly for collaborative arrangements could have resulted in less relevant financial reporting because the accounting may not have reflected the nature and economics of the arrangement. ASC 850, Related Party Disclosures, is the primary accounting guidance on this topic, coupled with certain SEC guidance. `d4%XfK`!beX,, 4sgD='e/0,Pdu _u4B'd.? Each member firm is a separate legal entity. The reporting entity should apply judgment in determining whether a production level is within the range of normal capacity considering various business- and industry-specific factors. See paragraphs BC22BC26 for the Boards basis for that decision. Additionally, when a reporting entity acquires assets by issuing equity interests to the seller, the reporting entity can elect to apply the measurement guidance in ASC 805-50 or the guidance in ASC 718. FSP Corps expenses for these advertisements are $2,000, and it expects to receive $1,000 from Toy Company. BC6. 1 0 obj H\n@E|E/E !KH^Cvb@/ed JT}7440SS ]dkfZ~K=&iv8$1a{=p Vnvm8}%t9on?3*~:L3:Mj?kW: }}_SR(^_-ywW+^ YJV L~!o"s\A0W+ 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. Refer to Appendix D of the publication for a summary of the updates. The Board considered that feedback during its redeliberations of the issues addressed by the proposed Update, as described in the discussion below. Like the depreciation or amortization of tangible long-lived assets, the amortization of intangibles may be included in operating expenses or cost of sales, depending on the use of the asset. In less common situations, a payment may be unrelated to the customer-vendor relationship (e.g., the resolution of a separate commercial dispute) and subject to other guidance, such as the guidance for contingent gains (see, If payments are received in exchange for a distinct good or service that the reporting entity transfers to the vendor, the reporting entity should recognize the payment as revenue, assuming the goods or services are an output of the reporting entitys ordinary activities. An entity was permitted to present the payments based on an analogy to other Topics or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. <> 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. The agenda request asked that the Board consider providing recognition and measurement guidance for nonrevenue transactions between collaborative arrangement participants. NCIs may arise in an asset acquisition when the acquirer obtains a controlling financial interest, but less than 100%, of an entity that does not meet the definition of a business. 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. BC15. Many reporting entities choose to disclose this information as one or more lines in thestatements of operations andof cash flows. hbbd```b``@$dLm D2hE\lU0 X2W@Nt $ Xmg` 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, ASU 2018-18Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606, {{favoriteList.country}} {{favoriteList.content}}. 50 % of FSP Corps expenses for these advertisements are $ 2,000, and may sometimes refer to pwc! 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