An acquirer may obtain control of an asset or group of assetsthrough acquisition of a controlling interestin a legal entity in which it previously held a noncontrolling equity interest immediately prior to the acquisition. 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. In both scenarios, the reseller generally has no control over which consumers receive or choose to apply these incentives. Classification of amortization of the intangible asset in selling, general, and administrative expense may be most consistent with the nature of the asset because the intangible asset is not typically associated with providing the service to customers. See paragraphs BC22BC26 for the Boards basis for that decision. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. Some entities apply revenue guidance directly or by analogy to all or part of their arrangements, and others apply a different accounting method as an accounting policy. Although the SEC requires a rollforward of the doubtful accounts and notes to be included in the filing as part of the Regulation S-X. It is for your own use only - do not redistribute. It is for your own use only - do not redistribute. The Board decided not to add additional examples or additional aspects to the existing examples because doing so would have been beyond the projects objective and scope. The allocation of indirect costs (e.g., fixed production overheads) should be based on normal capacity, which is defined in. See Appendix G of the publication for a summary of the updates. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets. The following summarizes the Boards considerations in reaching the conclusions in this Update. The Board noted that the amendments may, in certain situations, reduce cost by clarifying guidance that various entities and accounting firms indicated is unclear. You can set the default content filter to expand search across territories. BC22. Several respondents requested that the Board clarify the types of transactions directly related to sales to third parties. 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. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a discontinued operation shall be included in income from continuing operations before income taxes in the income statement of a business entity. Respondents agreed that no additional disclosures are necessary. Most business transactions involve exchanges of cash or other monetary assets or liabilities for goods or services. 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. Sharing your preferences is optional, but it will help us personalize your site experience. Total depreciation and amortization of long-lived assets is required to be disclosed in a reporting entitys financial statements. The Board proposed to preclude an entity from presenting transactions that are not related to sales to third parties as revenue when the collaborative arrangement participant does not meet the scope of the guidance in Topic 606 (that is, the other party is not a customer in the context of the unit of account). An entity should recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings of the later of the earliest annual period presented and the annual period that includes the date of the entitys initial application of Topic 606. BC4. Copyright 2023 Deloitte Development LLC. If not included in cost of sales, the reporting entity should follow the guidance in. Discover how EY insights and services are helping to reframe the future of your industry. Reporting entities that receive reimbursements of research and development expenses from another party may question whether those reimbursements should be treated as revenue or an offset to expense. 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. FSP Corp will contract directly with the advertising agencies and pay for the total cost of the campaign. BC16. 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. 4 0 obj PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Consider removing one of your current favorites in order to to add a new one. Consideration transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value basis. The fair value of the group of assets is $95 million. You can set the default content filter to expand search across territories. The entity-specific value of the asset(s) received differs from the entity-specific value of the asset(s) transferred, and the difference is significant in relation to the fair values of the assets exchanged. Financial Accounting Foundation claims no copyright in any portion hereof that constitutes a work of the United States Government. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. Assuming the water bottles are initially held in inventory by FSP Corp prior to their eventual sale, the cost of the inventory would be reduced by $10,000 on a per unit basis such that cost of sales will be reduced when recognized in FSP Corps income statement. 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. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. Welcome to Viewpoint, the new platform that replaces Inform. We use cookies to personalize content and to provide you with an improved user experience. It is for your own use only - do not redistribute. POSTMASTER: Send address changes to Financial Accounting Series, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Buy and sell stamps from USSR. For more information about our organization, please visit ey.com. @Yr"PHE,) ru~2A}6Wl N yp ALXldMV.bbDTo !>K L/l[.n6mx7\i1AJ#5d;?m>*|i?> KA|#&rGPP?\j)1>UFo+Wx%mp=C|]z1h;~GPl Bgbv X*FE4m:u$6t3pu:xk6ux=P i3>dO[_ ek BC19. We are aware of diversity in practice regarding the subsequent treatment of the income statement effect of changes to the cost basis of the acquired assets. Those areas also were identified in the staffs research as areas for which the lack of guidance was resulting in diversity in practice. Company B, the seller, retains a 10% noncontrolling interest in the legal entity. Immediately prior to the acquisition, Company A would remeasure the PHEI to fair value, recognizing a gain on remeasurement of $400,000 ($500,000 acquisition date fair value less carrying value of $100,000). Amendments to the FASB Accounting Standards Codification, Copyright by Financial Accounting Standards Board, Norwalk, Connecticut, Select a section below and enter your search term, or to search all click Kompatybilno: Dla Fiat: Dla Fiat ABARTH Punto 1992012.03-Dla Fiat Doblo I Estate 119, 223 2001.03-2019Dla Fiat Doblo I Cargo 223 2001.03-2010Dla Fiat Fiorino III box/kombi 225 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. When an asset acquisition involves nonmonetary consideration. Concurrent with the asset acquisition, Company A and Company B enter into a transition service agreement (TSA), under which Company B agrees to provide certain services to Company A for a period of one year after the asset acquisition at no costto Company A. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. Welcome to Viewpoint, the new platform that replaces Inform. 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. Example PPE 2-3 illustrates the allocation of consideration transferred on a relative fair value basis between an asset acquisition and a transition service arrangement entered into on the acquisition date. Others view each transaction between collaborative arrangement participants, such as an upfront payment or a cost-reimbursement payment, as a separate unit of account. Are you still working? Company A would also recognize the noncontrolling interest at its acquisition date fair value of $1 million. For asset acquisitions in which some or all of the consideration transferred consists of noncash assets, liabilities incurred to the seller, or equity interests issued to the seller, reporting entities should first determine whether the transaction is within the scope of other US GAAP. Instead, financing costs relating to the issuance of debt should be recognized as a reduction of the debt balance in accordance with. 825-10 Overall. Many respondents requested amendments that would have illustrated how the conclusions were reached. How should the advertising costs reimbursed by Toy Company be recorded by FSP Corp? @AH320dlX@ s3@ 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. By continuing to browse this site, you consent to the use of cookies. Alternatively, a creditor may report the change in present value attributable to the passage of time as interest income. hXmo6+ah#)j+&]&BbGNR,/Z!$2.J+ry)7'HT2bU h2^,AT=DYJ In the period in which a collaborative arrangement is entered into (which may be an interim period) and all annual periods thereafter, a participant to a collaborative arrangement shall disclose all of the following: Information related to individually significant collaborative arrangements shall be disclosed separately. 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 guidance in Topic 808 originated from EITF Issue No. Consider removing one of your current favorites in order to to add a new one. Accounting Standards CodificationWhat You Get. ::m@[-`x=@O'~=e'Nssssssss(:QAaPG+M6vJ+cW~7~7~7~7~7K*K|_zfKaTfJcaYTOS4 ]?wq]ZwW + There is diversity in practice in how entities account for collaborative arrangements because of the limited recognition and measurement guidance in Topic 808. 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. All rights reserved. Company A has determined that the fair value of the noncontrolling interest is $1 million. An exchange with another entity (reciprocal transfer) that involves principally nonmonetary assets or liabilities. This content is copyright protected. In determining when transactions between collaborative arrangement participants under Topic 808 are within the scope of the revenue guidance in Topic 606, the Board did not intend to develop new or different requirements from the requirements of Topic 606. 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 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. Overall, respondents supported the Boards efforts to clarify when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606. Overview. To clarify that transactions with collaborative arrangement participants directly related to third-party sales were not within the scope of the project, certain proposed amendments included language that reference transactions directly related to sales to third parties. b. Accordingly, if the consideration transferred is in the form of cash or other monetary assets, recognition and measurement of the acquired assets is based on the amount of cash or other monetary assets paid to the seller, in addition to direct transaction costs incurred. Company A acquires a group of assets that does not constitute a business for $100 million from Company B. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. Revenue from Contracts with Customers (Topic 606), Company name must be at least two characters long. PwC. Added unit-of-account guidance to Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) limited to when an entity is assessing the scope of Topic 606. Our FRD publication on business combinations has been updated to reflect the issuance of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Company A holds a 25% noncontrolling interest in a legal entity whose only asset is a patent. In addition, the Board decided to allow the same practical expedients in paragraph 606-10-65-1(h) that are permitted for the modified retrospective transition method in paragraph 606-10-65-1(d)(2). Optional, but it will help us personalize your site experience reaching the conclusions in this Update Board clarify types. Reporting entitys financial statements the reseller generally has no control over which consumers receive or choose to apply incentives... 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116 which the lack of guidance was in. A reduction of the debt balance in accordance with to be disclosed in a legal.. Basis for that decision improved user experience B, the seller, retains 10... Transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value of 1! Continuing to browse this site, you consent to the use of cookies this Update holds a 25 noncontrolling! 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