Whensome or all of the depreciation and amortization related to the manufacturing of products or the services providedby a reporting entity are excluded from the cost of sales line item, Amortization expense may result from lease transactions that are accounted for under. endstream endobj startxref 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. %PDF-1.5 % See. uGj|] h8 Eo9C6JJ>&4h\MV u: In making that decision, the Board acknowledged the different accounting models and outcomes between transactions involving a collaborative arrangement as defined in Topic 808 and those involving a separate legal entity with similar characteristics. The Board concluded that no additional recurring disclosures are necessary because of the projects limited scope and because the current disclosures in Topics 606 and 808 are robust. All rights reserved. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. Early adoption is permitted, including adoption in any interim period, (1) for public business entities for periods for which financial statements have not yet been issued and (2) for all other entities for periods for which financial statements have not yet been made available for issuance. Because of the proposed models flexibility, certain participants raised concerns that the model would be difficult to apply and that it may not solve many of the challenges raised about recognition. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Ultimately, the Board decided not to propose a nonrevenue accounting model for collaborative arrangements for the reasons discussed below. ]bqi"w8=8YWf8}3aK txg^+v!a{Bhk 5YliFeT?}YV-xBmN(}H)&,# o0 For example, an entity computing an entity-specific value of an asset would use its expectations about its use of that asset rather than the use assumed by marketplace participants. BC2. [paragraph 606-10-15-3]. EY helps clients create long-term value for all stakeholders. 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. Asset acquisitions may includecontingent consideration, which represents an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events occur or conditions are met. Review ourcookie policyfor more information. H\@=OQEn$dy ! .|1=(_neNMtxlYk9ce]rt2O7nC|oS?_qVC_k}./{z7^w%1X7qSEz\^,_w=eUtH3{da__KyF~c~C0o[ww<=d^"2NOl{=~O4{=NM`6M`6M`6M`6M`v(Px Concurrent with the asset acquisition, Company A and Company B enter into a transition service agreement (TSA), under which Company B agrees to provide certain services to Company A for a period of one year after the asset acquisition at no costto Company A. 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. BC12. 392 0 obj <> endobj Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. Others view each transaction between collaborative arrangement participants, such as an upfront payment or a cost-reimbursement payment, as a separate unit of account. FSP Corps expenses for these advertisements are $2,000, and it expects to receive $1,000 from Toy Company. ASC 705 Cost of Sales and Services. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. This content is copyright protected. Many respondents requested amendments that would have illustrated how the conclusions were reached. It is for your own use only - do not redistribute. The amendments improve comparability by allowing the presentation of the units of account in collaborative arrangements that are within the scope of Topic 606 together with revenue accounted for under Topic 606. Other respondents requested clarity on how to interpret. See paragraph BC12BC16 for the Boards basis for the projects scope. A creditor that measures impairment based on the present value of expected future cash flows is permitted to report the entire change in present value as bad-debt expense. AB"& a{YH( k!9h#ADX4JJ"XTr Mt0Dz iKZ i8 S:HlvSfGHANN#3=b_"Y2WyI1i23"\!`TX@[lY}6QhX1VZ)}k1]-1_|;(vY RQo`e&Z`=Q+~~~J#*p*[lf$EvOdz[?vY .Rmmt(`NNM|_oE~g]`|wqZhBLSo?r|DCImT _WsFl63Z53;IQa7)amgIn/& J_s?P 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. 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. Therefore, the reseller should recognize reimbursements for vendors sales incentives that meet the criteria in. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. The configuration (risk, timing, and amount) of the future cash flows of the asset(s) received differs significantly from the configuration of the future cash flows of the asset(s) transferred. Instead, financing costs relating to the issuance of debt should be recognized as a reduction of the debt balance in accordance with. By continuing to browse this site, you consent to the use of cookies. You can set the default content filter to expand search across territories. BC27. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. Changes in observable market prices or the fair value of the collateral shall be reported as bad-debt expense or a reduction in bad-debt expense. We bring together extraordinary people, like you, to build a better working world. +1 816-802-5840. %R&"(kXDe-ERBlQ5V`D!%|ekHd?iwQKjEN,DBJuK,*cn 9 BC10. Unusual nature means that the event possesses a high degree of abnormality and is clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the company. Copyright 2018 by Financial Accounting Foundation. If the consideration transferred is in the form of liabilities incurred or equity interests issued to the seller, these amounts should generally be recognized on the acquisition date. ASC 805-50-30-2 specifically provides ASC 845 and ASC 610-20 as examples of other US GAAP that may apply to these transactions (see PPE 2.3.1.1). Periodicals postage paid at Norwalk, CT and at additional mailing offices. The $5 million allocated to the TSA would be recognized as an asset for the prepayment of the services and would be expensed as the services are provided over a one-year period. Poland stamp catalogue. The Board decided to address unit-of-account guidance in the context of the scope of the revenue guidance within the amendments in this Update. In the pre-agenda research phase, the Board considered including both collaborative arrangements within the scope of Topic 808 and arrangements with similar economics that are structured in a separate legal entity. However, to address the concerns that the amendments in this Update potentially could lead to more transactions without recognition and measurement guidance in Topic 808, the Board decided to continue to permit an entity to apply the revenue guidance in Topic 606 by analogy or, if there is no appropriate analogy, as a policy election, without requiring the entity to apply all the guidance in Topic 606, as long as it presents the transaction separate from revenue recognized from contracts with customers. 3 0 obj Reporting entities that engage in nonmonetary transactions are required by. e3UY?O\S? Contingent consideration recognized should be included in the initial cost of the assets acquired. The updated publication reflects ASU 2019-12, Simplifying the Accounting for Income Taxes. Many reporting entities, especially those in certain industries (e.g., biotechnology), incur significant research and development expenses. For inquiries and feedback please contact ourAccountingLink mailbox. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. 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). Download now. The fair value of neither the asset(s) received nor the asset(s) relinquished is determinable within reasonable limits. N1.2 Scope of ASC 845 ASC 845 includes the following definitions: Monetary assets and liabilities Assets and liabilities whose amounts are fixed in terms of units of currency by contract or otherwise (e.g., cash, short- or long-term accounts and notes receivable in cash, and short- or long-term accounts and notes payable in cash). See more on AccountingLink Subscribe to AccountingLink updates, Do Not Sell or Share My Personal Information. An entity may not adopt the amendments earlier than its adoption date of Topic 606. Welcome to the Deloitte Accounting Research Tool (DART)! The Board clarified that its intent was to preclude presentation together with revenue accounted for under Topic 606 for those transactions outside the scope of Topic 606. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. A material event or transaction that an entity considers to be of an unusual nature or of a type that indicates infrequency of occurrence or both shall be reported as a separate component of income from continuing operations. The EITF did not provide specific recognition and measurement guidance because of the difficulty in developing a single accounting model that could be applied to the wide range of different collaborative arrangements. The Board proposed to preclude an entity from presenting transactions that are not related to sales to third parties as revenue when the collaborative arrangement participant does not meet the scope of the guidance in Topic 606 (that is, the other party is not a customer in the context of the unit of account). %%EOF Various Printing options, including printer-friendly utility for viewing . BC31. The assessment ofwhether a good or service is distinct is a two-pronged test: the good or service must be both (1) capable of being distinct and (2) separately identifiable. ,T1TgUj\zdIgU]d4{~>Aaj&f*ymE{!.3tW`Fb|xACCmPKLKtk 8Hr?VB;xws4A(["I@lZ!=N[C%;p[=ty"0|"8YCTan|)syk&v2Y.gNg^1]8? Although the TSA stipulates that the services will be performed by Company B at no cost to Company A, the substance of the transaction is that a portion of the consideration for the purchase of the assets relates to the transition services that will be provided in the future. bA|?G4l#z@(NZ}\#FF!5B^ J`6kj"^t+Vgkvow$X#L+#(]U(.-bY7\bXDG`!#!| A AV af$2-!\lA`<=a Q a~+ixzaaBdO?5a# M#1P+3>iG&H[A 1gH72Cb1[fn0)LpZfr09(%Zfv0IL.bR 1tT!lRzgn+Vd[7EzO|(OO\2( q n|8,VO,{y6/NUW'K 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. Some respondents requested that the Board clarify in what sequence the unit-of-account guidance should be applied. BC4. Company A has determined that the fair value of the noncontrolling interest is $1 million. This content is copyright protected. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. The fair value of the group of assets is $95 million. Both in the agenda request and in other outreach, many preparers indicated that identifying the unit of account in a collaborative arrangement, especially during the development phase, can be challenging because of the ongoing nature of the arrangement. However, the consideration must be for reimbursement of specific, incremental, identifiable costs incurred by the reporting entity to sell the vendor's products. Some entities view all transactions between the collaborative arrangement participants as a single unit of account because of their continuing obligation to participate. Download from EY Accounting Link # ASC 840 # leases # US GAAP endstream endobj 393 0 obj <>/Metadata 59 0 R/Pages 390 0 R/StructTreeRoot 78 0 R/Type/Catalog>> endobj 394 0 obj <>/MediaBox[0 0 612 792]/Parent 390 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 395 0 obj <>stream Reporting entities should not separately disclose the earnings per share effect of inconsequential items and items clearly of an operating nature (e.g., weather-related events, strikes, or start-up expenses). The amendments in this Update affect all entities that have collaborative arrangements. 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