As described in paragraph 24(b) of Concepts Statement No. stream Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. BC15. Are you still working? 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. 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 are not intended to address transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant and, therefore, do not result in changes to the presentation of those transactions. +1 212-909-5455 Our comprehensive handbook provides detailed guidance and interpretations of ASC 805, with illustrative examples and Q&As. However, the basis for conclusions of Update 2014-09 explains that transactions with partners or participants in a collaborative arrangement can be within the scope of Topic 606 if the counterparty meets the definition of a customer for some or all parts of the arrangement. It is for your own use only - do not redistribute. 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. ]bqi"w8=8YWf8}3aK txg^+v!a{Bhk 5YliFeT?}YV-xBmN(}H)&,# o0 FSP Corp will contract directly with the advertising agencies and pay for the total cost of the campaign. )Rp(%%exSROw.j:J8RK. **PG\7yq+~|9*2Ox The observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan may change from one reporting period to the next. Gains or losses of a similar nature that are not individually material shall be aggregated. An entity may not adopt the amendments earlier than its adoption date of Topic 606. ,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? Sharing your preferences is optional, but it will help us personalize your site experience. Welcome to Viewpoint, the new platform that replaces Inform. BC13. BC8. This was consistent with comments from respondents who stated that providing a year for implementation would provide entities that have extensive collaborative arrangements with adequate time to review their contracts. BC20. 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. BC36. Copyright 2023 Deloitte Development LLC. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. Consider removing one of your current favorites in order to to add a new one. Property, plant, equipment and other assets. Content copyrighted by Financial Accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Foundation. BC5. The income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants for each period an income statement is presented. FSP Corp enters into a supplier agreement with Toy Company to purchase toys to sell through its website. Please see www.pwc.com/structure for further details. It also clarifies and enhances interpretive guidance in several areas. The Board chose not to expand the scope of the project to include arrangements structured within a legal entity (such as joint ventures). 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. Accounting Standards Codification (ASC) Topic 808, Collaborative Arrangements, provides guidance for income statement presentation, classification and disclosures related to collaborative arrangements. hko6 PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. The Board received 27 comment letters in response to the proposed Update. For transactions involving nonmonetary consideration within the scope of Topic 845, an acquirer must first determine if any of the conditions in paragraph 845-10-30-3 apply. %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 . hbbd```b``5 fO `vdUZR0Y" IF Xl;10120md`w BC31. %PDF-1.5 % Bulgaria stamp catalogue. Company A acquires a 90% controlling interest in a legal entity whose only asset is a patent. 1 0 obj 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. endstream endobj 1373 0 obj <>stream h1_4'n4PK7C[u9!+m{e:v!|xmaDqI"JFD+HsC%Vc1@pf@p!! Company A acquires the remaining 75% interest in the legal entity for $1.5 million in cash; there were no direct transaction costs incurred. IF!izskcc_*'$zW-kBo:N#*!_T=v)\ry tCSW1c*yJA.D2$q5_)}L ] XOX4& 0b:Pt(hEP2@h`0vSFa^&0AP$dFt0e ` a%r T2LXHmGsGHHPB H2XH"ECAc{0A_^! Others view each transaction between collaborative arrangement participants, such as an upfront payment or a cost-reimbursement payment, as a separate unit of account. The classification of insurance proceeds in the income statement depends on the nature of the insurance claim. How should Company A account for the services to be received under the TSA? If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. You can set the default content filter to expand search across territories. See paragraphs BC31BC33 for the Boards basis for that decision. Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. If a part or parts of the collaborative arrangement are potentially with a customer, an entity would then apply the distinct good or service unit-of-account guidance in Topic 606 to determine whether there is a unit of account that should be accounted for under Topic 606. In other words, the reporting entity should account for the sale the same way it accounts for sales to other customers. [uLBCn20x10DY5fS ] yD@YC Hw15A1 B In general, the disclosure shall encompass important judgments as to appropriateness of principles relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following: However, if they are material, they should be presented separately on the face of the income statement as an operating expense. 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). Consideration transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value basis. 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 If a subtotal such as income from operations in presented, it shall include the amounts of those gains or losses. The Board agreed that the amendments will benefit users by reducing diversity in practice by clarifying that certain transactions between collaborative arrangement participants should be accounted for in accordance with the guidance in Topic 606 and by clarifying certain presentation requirements. Each member firm is a separate legal entity. 7, an entity-specific value attempts to capture the value of an asset or liability in the context of a particular entity. FSP Corp should therefore recognize $1,000 as a reduction of the cost of its purchases from Toy Company and, using a systematic and rational allocation approach, recognize a corresponding reduction in costs of sales when the related products are sold. 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. 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. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. 4 0 obj Some respondents requested additional guidance on what to do when an entity concludes that the unit of account consists of promised goods or services that are partially within the scope of Topic 606 and are not. Additionally, some respondents asked for examples that would have included provisions more representative of collaborative arrangements seen in practice, such as upfront payments and licenses. 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. ?oTku>vbxxJkx 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. Company A determines that the transaction should be accounted for as an asset acquisition, as the legal entity acquired does not constitute a business. On the date of the acquisition, Company A should allocate the transaction price of $100 million between the acquired group of assets and the TSA with Company B on a relative fair value basis. Company A has previously made an accounting policy election to analogize to the business combinations guidance in remeasuring previously held equity interests in an asset acquisition. Alternatively, a creditor may report the change in present value attributable to the passage of time as interest income. Please seewww.pwc.com/structurefor further details. Welcome to Viewpoint, the new platform that replaces Inform. On the other hand, a reporting entity may have a patent intangible asset that is used in the production of its products. %%EOF Instead, financing costs relating to the issuance of debt should be recognized as a reduction of the debt balance in accordance with. Reporting entities may have flexibility as to how they present bad debt expense (i.e., expense associated with changes in the provision for receivables). 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 The Board clarified that an entity should first determine whether the entire collaborative arrangement is a contract with a customer or whether it is entirely within the scope of other GAAP. Review ourcookie policyfor more information. How should Company A account for the asset acquisition, including the previously held equity interest (PHEI)? For example, a reporting entity that provides security monitoring services may have an acquired customer-relationship intangible asset. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. This content is copyright protected. See. 1434 0 obj <>stream EY updates FRD on income taxes EY has updated its Financial reporting developments (FRD) publication on income taxes. The guidance in Topic 808 originated from EITF Issue No. 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. Those accounting differences result in diversity in practice on how entities account for transactions on the basis of their view of the economics of the collaborative arrangement. Meet other stamp collectors interested in USSR stamps. The acquirer and the seller in an asset acquisition may enter into separate arrangements at or near the time of the asset acquisition. 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. The Board noted that current guidance allows an entity to evaluate the terms of a collaborative arrangement to determine how best to account for and present those transactions. Meet other stamp collectors interested in Poland stamps. Q+ HMo0. Normal capacity refers to a range of production levels. Meet other stamp collectors interested in Bulgaria stamps. FSP Corp enters into a supply contract with Water Company to purchase water bottles for $100,000. Some respondents requested that the Board provide additional guidance on how to determine whether a collaborative arrangement participant is a customer. The terms of significant arrangements under the research and development arrangement (including royalty arrangements, purchase provisions, license agreements, and commitments to provide additional funding) as of the date of each balance sheet presented. An entity-specific value (referred to as an entity-specific measurement in FASB Concepts Statement No. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. BC25. BC26. This Topic notes that it "only provides links to guidance on accounting for the cost of sales and services in other applicable Subtopics as the asset liability model used in the Codification generally results in the inclusion of that guidance in other Topics.". If the consideration given is nonfinancial assets or in substance nonfinancial assets within the scope of Subtopic 610-20, the assets acquired shall be treated as noncash consideration and any gain or loss shall be recognized in accordance with Subtopic 610-20. Download from EY Accounting Link # ASC 840 # leases # US GAAP This content is copyright protected. 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}}. Financial statement presentation. Various Printing options, including printer-friendly utility for viewing . endstream endobj startxref 392 0 obj <> endobj endstream endobj 1375 0 obj <>stream Company A would also recognize the noncontrolling interest at its acquisition date fair value of $1 million. Water Company provides FSP Corp with $10,000 to ensure that its products receive prominent placement on store shelves (that is, it pays a slotting fee). Several respondents requested that the Board clarify the types of transactions directly related to sales to third parties. A change in any one of those elements would be a change in configuration. 2.3 Initial measurement (asset acquisitions). Those respondents requested that the Board clarify whether it intended to preclude the aggregation of other sources of revenue from collaborative arrangements with revenue that is within the scope of Topic 606 or to more generally preclude revenue presentation. BC11. Consider removing one of your current favorites in order to to add a new one. The Board considered whether a project scope limited only to arrangements conducted outside a legal entity could compound existing differences in accounting models for arrangements that may have similar characteristics but are conducted within a legal entity. EY FRD Lease accounting - ASC 840 alishan June 5, 2022 EY US GAAP Publications, US GAAP EY FRD publication on accounting for leases under ASC 840 has been updated to clarify and enhance our interpretive guidance. BC24. We generally believe the subsequent amortization of a favorable or unfavorable revenue contract should be recognized within the income statement as contra-revenue or revenue, respectively. Terms of reimbursement to the reseller for the vendor's sales incentive offered to the consumer must not be influenced by or negotiated in conjunction with any other incentive arrangements between the vendor and the reseller but, rather, may be determined only by the terms of the incentive offered to consumers. Select a section below and enter your search term, or to search all click In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. The Board decided to permit an entity to early adopt the amendments in this Update, including adoption in any interim period, if the entity has already adopted or is concurrently adopting Topic 606. 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. 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