FASB UPDATE FOR PRIVATE COMPANIES Timothy Pike, CPA, CFE Howard & Co, LLP

Agenda RECENTLY ISSUED OR EFFECTIVE STANDARDS FASB UPDATE & UPCOMING ACCOUNTING UPDATES

Recent Issued or Effective Accounting Standard Updates

Fair Value Measurement Amendments to Achieve Common Fair Value Disclosure Requirements in US GAAP and IFRS (Topic 820) Effective for annual periods beginning after 12/15/11 (prospectively) Primarily to converge wording

Transfers & Servicing Reconsideration of Effective Control for Repurchase Agreements (Topic 860) Agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity Adjusts rules to determine when these are financings instead of sales

Continued Current Rules: Maintaining effective control over a financial asset New Rules: The transferor has the ability to repurchase or redeem financial asset Effective for the first interim or annual period beginning on or after 12/15/11 (no early adoption)

Receivables A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (Topic 310) Effects all creditors that restructure receivables Effective annual periods ending on or after December 15, 2012 (early adoption permitted)

Continued Troubled Debt Evaluation must Conclude: ◦ The restructuring constitutes a concession ◦ The debtor is experiencing financial difficulties Certain items excluded (e.g. changes in lease agreements or pension plans)

Receivables Deferral of the effective date related to disclosures about troubled debt restructurings ASU

Business Combinations Disclosure of Supplementary Pro Forma Information for Business Combinations (Topic 805) Pro Forma information should be reflected retrospectively (all periods presented) Effective for Periods Beginning After 12/15/10

Intangibles, Goodwill… When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350) Effective periods beginning after 12/15/11, but may early adopt one year earlier

Continued If the reporting unit value is zero or negative and Step 1 is passed, you must perform Step 2 Effective for years (& interim periods) beginning after 12/15/11, but may early implement up to 12/15/10

Other Expenses Fees Paid to the Federal Government by Pharmaceutical Manufacturers (Topic 720) Effective calendar years beginning after 12/31/10, when the fee becomes effective

Financial Services - Insurance Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (Topic 944) Effective for periods beginning after 12/15/11 Details expenses that can/should be capitalized and those expensed as incurred

Plan Accounting Reporting Loans to Participants by Defined Contribution Pension Plans (Topic 962) Carried at Fair Value? Notes Receivable Effective years ending after 12/15/10, early adoption allowed

Health Care Entities Presentation of Insurance Claims and Related Insurance Recoveries (Topic 954) Accounting for medical malpractice claims and similar contingent liabilities and the related anticipated insurance recoveries Effective years beginning after 12/15/10, early application permitted (cumulative effect adjustment to opening retained earnings)

Health Care Entities Measuring Charity Care for Disclosure (Topic 954) Requires the use of cost (not revenue) to be used to measure and disclose charity care Effective for fiscal years beginning after 12/15/10. Apply retrospectively, early adoption permitted

Accounting for Various Topics SEC Update Technical Amendments

Receivables Disclosures about the Credit Quality of Financing Receivables and the Allowances for Credit Losses (Topic 310) Clarity to evaluate an entity’s credit risk exposure and adequacy of credit loss allowances Effective periods ending after 12/15/11

Foreign Currency Multiple Foreign Currency Exchange Rates (Topic 830) SEC UPDATE

Receivable Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset (Topic 310) Maintain loan pools Effective prospectively; first period ending on or after 7/15/10. (Early application permitted)

Milestone Method Milestone Method of Revenue Recognition (Topic 605) Research and Development Transactions Periods beginning on or after June 15, 2010

Entertainment - Casinos Accruals for Casino Jackpot Liabilities (Topic 924) Jackpots not required to be paid are not accrued Effective periods beginning on or after 12/15/10

FASB UPDATE & UPCOMING ACCOUNTING UPDATES

Upcoming Considerations New FASB Chair Leslie Seidman ◦ Board member since 2003 ◦ Managed her own firm

Private & Nonprofit Standards Blue ribbon panel recommendations Currently in phase 2 Supported by FASB Chair*

2 Significant Projects Revenue Recognition Leases

Revenue Recognition Provide one source/location for revenue recognition Improve definitions and industry variations Many questions still remain

Leases Eliminate off-balance sheet accounting Provide for a single method of accounting Eliminates “technicalities” of the bright- line tests Reflect an exposure to risk and benefit with the use of leased assets

Leases, Continued More timely information Simplified approach for short-term leases Does not change current definition of a lease contract

Leases, continued Accounting: ◦ Change the timing and location of expenses (in the financials) ◦ Lease assets & liabilities recognized at present value of payments to be made over the contract term and carried at amortized cost ◦ Continual reassessment

FASB Projects