An entity should disclose its election. FSP Corp enters into a supplier agreement with Toy Company to purchase board games to sell through its website. 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. The Board also acknowledged the need to clarify the items in the agenda request on a timely basis given the effective date of Topic 606. BC4. Please seewww.pwc.com/structurefor further details. You can set the default content filter to expand search across territories. BC15. The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. 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. The income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants for each period an income statement is presented. 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. X[7? Any unallocated fixed cost overheads, including depreciation expense, are considered period costs and should be charged to earnings in the current period. Such footnote disclosure may be desirable for items that affect the comparability of income statements between periods. 3 0 obj The Board did not intend to establish an exception to the revenue requirements in Topic 606 for transactions in collaborative arrangements. For all other entities, consistent with the Private Company Decision-Making Framework, the Board decided that the amendments in this Update should be effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. 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. 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. Similarly, the EPS effects of those items shall not be presented on the face of the income statement. PK ;bVoa, mimetypeapplication/epub+zipPK ;bV2[ META-INF/container.xmlM OAX LE7CJHHH o/t/;y 9:B- . Follow the asset acquisition cost accumulation model and include the acquirers carrying amount of the PHEI, along with the fair value of any consideration paid and direct transaction costs incurred, in determining the cost to be allocated to the assets acquired. A reporting entity may report reimbursement of costs incurred to sell the vendors products (e.g., cooperative advertising) as a reduction of that cost in its income statement. 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. ASC 705 Cost of Sales and Services. 392 0 obj <> endobj Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. BC21. %%EOF How should Company A account for the asset acquisition, including the noncontrolling interest? 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. BC8. Company A determines that the transaction should be accounted for as an asset acquisition, as the legal entity acquired does not constitute a business. Regina Croucher. The agenda request asked the Board to clarify if, and when, transactions in a collaborative arrangement were within the scope of the revenue guidance in Topic 606. Buy and sell stamps from USSR. s\A0W+d g"p&g"p&xc&>>>>>>J^QW+u_W+sSMs=*zTQGe=z4o7o7Y*+m}RsF.0x Are you still working? FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Acquisitions SEC Reporting Considerations, Comparing IFRS Accounting Standards and U.S. GAAP, Consolidation Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Convertible Debt (Before Adoption of ASU 2020-06), Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees SEC Reporting Considerations, Fair Value Measurements and Disclosures (Including the Fair Value Option), Guarantees and Collateralizations SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Qualitative Goodwill Impairment Assessment A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. b. 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. Therefore, an entity may still analogize to those principles provided that the entity does not present the transaction together with revenue. The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. It has also been updated to further enhance and clarify our interpretive guidance in several areas. All rights reserved. Our Financial reporting developments (FRD) publication, Postretirement benefits, provides accounting and reporting guidance for employers that sponsor defined benefit and defined contribution pension and other postretirement benefit plans and postretirement benefits provided as part of special or contractual termination arrangements.The FRD provides an overview of the principles of . 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. However, if they are material, they should be presented separately on the face of the income statement as an operating expense. 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. The Board decided this to further emphasize the implications of the Boards decision to require an entity to apply all the accounting requirements in Topic 606 and to prevent diversity in how and when transactions in collaborative arrangements are presented as revenue. Therefore, the Board decided not to provide recognition and measurement guidance for nonrevenue transactions in a collaborative arrangement. 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. 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. 1368 0 obj <> endobj 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). Accounting Standards CodificationWhat You Get. Company A has determined that the fair value of the noncontrolling interest is $1 million. 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. ASC 825 comprises two Subtopics, below is an overview of each Subtopic. Within that context of determining whether a part of a collaborative arrangement is within the scope of Topic 606, the Board decided to include unit-of-account guidance that is consistent with the unit-of-account guidance in Topic 606 for distinct goods or services. for under the guidance in ASC 845 will now fall under the guidance in ASC 610-20 if they do not involve a customer. This edition includes ASU 2021-08 (contract assets and contract liabilities from contracts with customers) and application issues related to SPACs. This decision ultimately aligns with the accounting model in Topic 808, which is a residual model similar to Topic 606, indicating that an entity should first look to other guidance for separation. Both of those characteristics are, therefore, highly dependent on the environment in which a company operates. Accordingly, $95 million of the consideration transferred would be allocated to the group of assets acquired and $5 million would be allocated to the TSA, based on their relative fair values. 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. 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. w]Gpg&@fk=GBhBb| BC32. It specifically addresses the accounting for modifications of contracts within the scope of Topics 310 on receivables, 470 on debt, and 840 and 842 on leases and Subtopic 815-15 on . Furthermore, Board members questioned whether the arrangements involving separate legal entities are sufficiently similar to warrant considering expanding the scope of the collaborative arrangement guidance in Topic 808. Applicability Select a section below and enter your search term, or to search all click