experience direction // CPAs & ADVISORS NATIONAL FINANCIAL SERVICES GROUP Matthew P. Stout, CPA Chad M. Garber, CPA

ASU Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill (a consensus of the Private Company Council) What changed??? A Credit Union can elect to begin amortizing goodwill The election to amortize vs. carry gross is optional Effective for annual periods after December 15, Why would I want to amortize??? Don’t want to carry the goodwill on the balance sheet forever Don’t want the obligation to evaluate for impairment each year into eternity 2 // experience direction

ASU Receivables-Troubled Debt Restructurings by Creditors (Subtopic ): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure What changed??? FASB attempted to eliminate diversity in practice on foreclosure recognition “In-substance Foreclosure” Two criteria to meet the threshold for repossession: The creditor has obtained legal title to residential real estate upon completion of a foreclsoure The borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar agreement 3 // experience direction

ASU (CONTINUED) Disclosure requirements: The amount of foreclosed residential real estate property held by the creditor The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable juridictions Effective Date Annual periods ending after December 31, Early adoption is permitted beginning after December 15, How will this impact me??? It really shouldn’t The second disclosure item is new, but should be readily available 4 // experience direction

ASU Revenue from Contracts with Customers (Topic 606) Effective Date for Credit Unions Annual reporting periods beginning on or after December 15, 2017 May adopt one year earlier when public companies must adopt Who is impacted??? All entities that enter into contracts with customers Public, private, not-for-profit Regardless of industry Exceptions cited by the standard: Lease contracts Insurance contracts Financial instruments Certain guarantees (other than product warranties) Certain nonmonetary exchanges 5 // experience direction

ASU (CONTINUED) What changed for me??? Depository and Lending Institutions Revenue Recognition Task Force Established Charged with developing revenue recognition implementation issues that will provide helpful hints and illustrative examples for how to apply the new Revenue Recognition Standard 10 issues identified to date The list will be updated as the task force continues its discussions Potential Areas of Impact for Credit Unions Credit card reward programs Interchange income Sale of real estate, gain recognition 6 // experience direction

ASU Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure What Changed??? Requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: The loan has a government guarantee that is not separable from the loan before foreclosure At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed Effective Date Annual periods ending after December 15, // experience direction

PROPOSED ASU Leases What is changing Eliminates the concept of an operating lease for any lease greater than 12 months When is the standard coming Estimated to be final in Q CECL What is changing The allowance will become a forward-looking model (Expected vs. Incurred) When is the standard coming Estimated to be final is Q3 or Q Effective date is expected to be 2018??? 8 // experience direction

BKD THOUGHTWARE Webinars Articles Several of the topics from today are discussed in more detail and delivered by smarter people!!! 9 // experience direction

THANK YOU FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact: Matthew P. Stout, CPA // Partner // Chad M. Garber, CPA // Director //