A noncontrolling interest (NCI) is the equity interest in a subsidiary that is not attributable, directly or indirectly, to the parent. 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). Welcome to Viewpoint, the new platform that replaces Inform. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 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. Company A has determined that the fair value of the noncontrolling interest is $1 million. The issuance of Update 2014-09 on revenue from contracts with customers heightened the need for clarity on whether the guidance in Update 2014-09 applies to collaborative arrangements. Also, the consideration is not a reimbursement of specific, incremental, and identifiable costs incurred by FSP Corp to sell the vendors products. The full subscription rate is $283 per year. 1434 0 obj <>stream 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. G@ B H FFmpeg~ The.Sandman. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. The edits focused on changes resulting from the proposed amendments and were not intended to provide additional guidance on the application of Topic 606 or Topic 808. If not included in cost of sales, the reporting entity should follow the guidance in. 1389 0 obj <>/Filter/FlateDecode/ID[]/Index[1368 67]/Info 1367 0 R/Length 106/Prev 361115/Root 1369 0 R/Size 1435/Type/XRef/W[1 3 1]>>stream Handbooks | November 2022. Therefore, an entity may still analogize to those principles provided that the entity does not present the transaction together with revenue. By explicitly providing unit-of-account guidance in the context of assessing the scope of the revenue guidance and aligning the unit-of-account guidance with Topic 606, the Board also sought to eliminate potential future diversity in determining units of account when assessing whether a collaborative arrangement is partially within the scope of Topic 606 or other Topics. By continuing to browse this site, you consent to the use of cookies. PwC. Some respondents requested that the Board clarify certain aspects of the proposed amendments. A collaborative arrangement, as defined by the guidance in Topic 808, is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity's commercial success. 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. Some reporting entities choose to report all depreciation and amortization directly charged to earnings as a separate line item in the statement of operations rather than include it in the related line items by function (e.g., cost of sales, selling and marketing, general and administrative). The Board also considered providing a nonrevenue accounting model because its decisions could result in more transactions that would need recognition and measurement guidance that does not exist in Topic 808. The targeted improvements in this Update clarify that when a transaction is within the scope of the guidance in Topic 606, an entity is required to apply all the provisions of Topic 606, including the disclosure requirements. Overall, the feedback received during the workshops made it clear that if a nonrevenue model was developed, practice would desire more prescriptive guidance; however, there were strong opposing views on what that guidance should be. Other respondents requested clarity on how to interpret. follow the asset acquisition cost accumulation and allocation model and record the NCI at its carrying amount. The following summarizes the Boards considerations in reaching the conclusions in this Update. _W+ Property, plant, equipment and other assets. For non-SEC filers, ASC 855-10-25-2 indicates that subsequent events are events that occur after the balance sheet date but before the reporting entity's financial statements are available to be issued. Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606. ASC 848-20 notes that it "provides optional expedients for contract modifications undertaken because of reference rate reform. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. All rights reserved. <> 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. 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. Accordingly, the amendments in this Update do not result in any changes to the accounting for those transactions. 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. Clarified that, in a transaction that is not directly related to sales to third parties, presenting the transaction as revenue would be precluded if the collaborative arrangement participant is not a customer. BC15. hb```[@(q$(^uJ=-m 2 0 obj 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. We believe the acquirer in an asset acquisition should choose one of the following accounting policy elections on the acquisition date: In the absence of guidance for previously held equity interests in an asset acquisition, other measurement considerations may be acceptable (e.g., iterative equation). Nonmonetary transactions within the scope of ASC 845, Nonmonetary Transactions Lease contracts under ASC 840 Contributions of cash and other assets, including promises to give cash, that are either made by certain entities or received by not-for-profit entities within the scope of ASC 720-25, Other Expenses: ,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? 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. Such items shall not be reported on the face of the income statement net of income taxes. 1 0 obj When an asset acquisition involves nonmonetary consideration. There is diversity in practice in how entities account for collaborative arrangements because of the limited recognition and measurement guidance in Topic 808. 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). For purposes of this guidance, the phrase vendor's sales incentive offered directly to consumers is limited to a vendor's incentive that meets all the following criteria: PwC. As described in paragraph 24(b) of Concepts Statement No. Clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context ofa unit of account. The configuration of future cash flows is composed of the risk, timing, and amount of the cash flows. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. FSP Corp has discretion over the use of the allowance, and it is not required to provide Toy Company with supporting documentation of how the allowance was utilized. BC20. Select a section below and enter your search term, or to search all click Poland stamp catalogue. Impairments of long-lived assets may be included within operating income based on the function of the associated asset or presented separately in the income statement. 392 0 obj <> endobj 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. Company A pays $9 million in cash and $100,000 in direct transaction costs. Any unallocated fixed cost overheads, including depreciation expense, are considered period costs and should be charged to earnings in the current period. 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. All rights reserved. Those areas also were identified in the staffs research as areas for which the lack of guidance was resulting in diversity in practice. In other words, the reporting entity should account for the sale the same way it accounts for sales to other customers. The Board decided against providing recognition and measurement guidance for transactions with collaborative arrangement participants directly related to sales to third parties as part of this project. 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. 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. Each member firm is a separate legal entity. 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. %PDF-1.5 % 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. Follow along as we demonstrate how to use the site. 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. Such footnote disclosure may be desirable for items that affect the comparability of income statements between periods. Asset acquisitions in which the consideration given is cash are measured by the amount of cash paid, which generally includes the transaction costs of the asset acquisition. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. 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. The aggregate amount of goodwill impairment losses should be presented as a separate line item on the income statement within continuing operations unless a goodwill impairment is associated with a discontinued operation. The SG&A line item frequently includes the sum of all direct and indirect selling expenses, as well as all general and administrative expenses of the reporting entity. Please see www.pwc.com/structure for further details. Please seewww.pwc.com/structurefor further details. Disclosure shall be made in the financial statements of the total research and development costs charged to expense in each period for which an income statement is presented. 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. POSTMASTER: Send address changes to Financial Accounting Series, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 0 The amendments in this Update should be applied retrospectively to the date of initial application of Topic 606. b. 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. BC5. The Board decided not to include recognition and measurement guidance for nonrevenue transactions in the amendments. BC17. H\j >w%PrNReby6l*s)do@q;@. 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. |. Examples of transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant may include (a) sales of production inputs or other items to a collaborative arrangement participant that are eventually sold to a third party or (b) profit share receivables from collaborative arrangement participants for sales to third parties. BC24. However, because the Board decided not to include recognition and measurement guidance for nonrevenue transactions in a collaborative arrangement (see further discussion in paragraphs BC31BC33), the decision to align the unit-of-account guidance to the guidance in Topic 606 for distinct goods or services is limited to the context of assessing the scope of the revenue guidance. Consider removing one of your current favorites in order to to add a new one. 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. endobj Instead, financing costs relating to the issuance of debt should be recognized as a reduction of the debt balance in accordance with. 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. 6JK&S~cg34Gs&Je=6UpY5:#lL10,@,1@c4WTcZ0wt}G,! Consider removing one of your current favorites in order to to add a new one. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued) and no other generally accepted accounting principles (GAAP) apply (for example, Topic 845 on nonmonetary transactions or Subtopic 610-20), measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. You can set the default content filter to expand search across territories. In both scenarios, the reseller generally has no control over which consumers receive or choose to apply these incentives. [0p?'7l:u# YKD~2.o},P[ V p:dN#|eA^{k#l[0%8gT+ The amendments in this Update affect all entities that have collaborative arrangements. Audit teams serve the public interest by delivering high-quality, analytics-driven audits with independence . See paragraphs BC31BC33 for the Boards basis for that decision. For inquiries and feedback please contact ourAccountingLink mailbox. It is for your own use only - do not redistribute. S ZBF7l riQZ62=QSBa! 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. 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