Published March 28, 2013

FASB Releases Accounting Standards Updates

The Financial Accounting Standards Board ( FASB ) has released four Accounting Standards Updates ( ASUs ). PYA s summary of the Updates follows:

ASU No. 2013-01, Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities

This Update addresses implementation and clarifies the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The FASB has received comments indicating that the scope in ASU 2011-11 is unclear and may give rise to diversity in practice. It was brought to the FASB s attention that standard commercial provisions of many contracts could be construed as master-netting arrangements. Respondents questioned whether it was the FASB s intent to require disclosures for such a broad scope, which would significantly increase the cost of compliance.

The amendments clarify that the scope of Update 2011-11 applies to derivatives accounted for in accordance with Derivatives and Hedging (Topic 815). This includes bifurcated, embedded derivatives; repurchase agreements and reverse repurchase agreements; and securities-borrowing and securities-lending transactions that are either offset in accordance with Accounting Standards Codification ( ASC ) Section 210-20-45 or ASC Section 815-10-45 or subject to an enforceable master-netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master-netting arrangement or similar agreement are also affected, since this ASU excludes them from the disclosure requirements in ASU 2011-11.

This Update is effective for fiscal years beginning on or after January 1, 2013. The disclosures required by this Update should be applied retrospectively for all comparative periods presented.

ASU No. 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

The primary objective of this Update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements; however, they require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income, by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. This applies only if the reclassified amount is required under U.S. generally accepted accounting principles ( GAAP ) to be reclassified to net income in its entirety in the same reporting period.

For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. Substantially all of the information that this Update requires must be disclosed elsewhere in the financial statements under GAAP. However, the new requirements present such information in one place and, in some cases, they cross-reference the information to related footnote disclosures.

For nonpublic entities, the amendments in this Update are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted.

ASU No. 2013-03, Financial Instruments (Topic 825), Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities

The main objective of this Update is to clarify the scope and applicability of certain disclosures by nonpublic entities that resulted from the issuance of ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ( IFRS ). The FASB has indicated its intent to exempt all nonpublic entities from the disclosure requirement of ASU 2011-04. However, the amendments in ASU 2011-04 suggest that nonpublic entities that have total assets of $100 million or more, or that have one or more derivative instruments, would not qualify for the intended exemption.

The amendments in this Update clarify that the requirement to disclose the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3) does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed.

The Update was effective upon issuance.

ASU No. 2013-04, Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date

The main objective of this Update is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in GAAP. Debt arrangements, other contractual obligations, and settled litigation and judicial rulings are examples of obligations included in the scope of this Update. GAAP does not include specific guidance on accounting for such obligations with joint and several liability, which has given rise to diversity in practice. Some entities previously recorded the entire amount under the joint and several liability arrangement as a liability and accounted for its extinguishment as such, while other entities previously recognized less-than-the-total amount of the obligation–such as an allocated amount, an amount corresponding to the proceeds received, or the portion of the amount the entity agreed to pay among its co-obligors–based on guidance established for contingent liabilities.

The guidance in this Update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation, within the scope of this guidance, is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This Update also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations.

For nonpublic entities, the amendments in this Update are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter. The amendments should be applied retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity s fiscal year of adoption and that are within the scope of this Update. An entity may elect to use hindsight for the comparative periods (if it changes its accounting as a result of adopting the amendments in this Update) and should disclose that fact. Early adoption is permitted.

View the FASB Accounting Standards Updates. For more information, please contact the experts listed below at PYA, (800) 270-9629.

WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

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