Weitere ähnliche Inhalte Kürzlich hochgeladen (20) EY Q1 2013 Financial Reporting Update1. The Ernst & Young Q1 2013
financial reporting update
Co-sponsored with Financial
Executives International
20 March 2013
2. Disclaimer
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© 2013 Ernst & Young LLP Page 2 Ernst & Young Q1 2013 financial reporting update
3. Circular 230 disclaimer
► Any US tax advice contained herein was not
intended or written to be used, and cannot be used,
for the purpose of avoiding penalties that may be
imposed under the Internal Revenue Code or
applicable state or local tax law provisions.
► These slides are for educational purposes only and
are not intended, and should not be relied upon, as
accounting advice.
© 2013 Ernst & Young LLP Page 3 Ernst & Young Q1 2013 financial reporting update
4. Today’s moderator
Danita Ostling
Ernst & Young LLP
Partner, Professional Practice Director
Ernst & Young organization
Americas IFRS Leader
Join today's Twitter discussion:
#EY_Q1Update
© 2013 Ernst & Young LLP Page 4 Ernst & Young Q1 2013 financial reporting update
5. Today’s agenda
► Q1 matters to consider
► Convergence projects update
► Future considerations
Join today's Twitter discussion:
#EY_Q1Update
© 2013 Ernst & Young LLP Page 5 Ernst & Young Q1 2013 financial reporting update
6. Today’s presenters
Rachel Eckstein Lisa Kennedy Robert Wadley
Ernst & Young LLP Ernst & Young LLP Ernst & Young LLP
Partner Partner Partner
Professional Practice Professional Practice Professional Practice
The information in this presentation is a summary. Viewers should consult their
own professional advisors to address their individual circumstances and concerns.
© 2013 Ernst & Young LLP Page 6 Ernst & Young Q1 2013 financial reporting update
7. Today’s agenda
► Q1 matters to consider
► Convergence projects update
► Future considerations
Join today's Twitter discussion:
#EY_Q1Update
© 2013 Ernst & Young LLP Page 7 Ernst & Young Q1 2013 financial reporting update
8. Reporting amounts reclassified out of
accumulated other comprehensive income
► ASU 2013-02 issued in February 2013
Effective dates for calendar year-ends
Transition method Public Private Early adoption?
Prospective 1Q 2013 YE 2014 Yes
► Requires more disclosures about changes in accumulated
other comprehensive income (AOCI)
► Reclassifications from AOCI
► Other current period other comprehensive income
► Requires reporting significant items reclassified out of
AOCI by component in one place
► Components include currency translation and unrealized
gains on available-for-sale securities, etc.
© 2013 Ernst & Young LLP Page 8 Ernst & Young Q1 2013 financial reporting update
9. Reporting amounts reclassified out of
accumulated other comprehensive income
Items reclassified out of AOCI
Significant items that are not
Significant items reclassified
reclassified directly to net
to net income in their entirety
income in their entirety
Identify the effect of Cross reference to other
reclassifications on disclosures that provide
respective line items in the additional information
statement where net income about the effect of the
is presented by component reclassification
► On the face of the financial
statements (if criteria are
met) OR
► In the notes
© 2013 Ernst & Young LLP Page 9 Ernst & Young Q1 2013 financial reporting update
10. Reporting amounts reclassified out of
accumulated other comprehensive income
Details about AOCI Amount reclassified Affected line item in the statement where
components from AOCI1 net income is presented
Unrealized gains and losses on available-for-sale securities
$ 126,000 Realized gain on sale of securities
Insignificant items (1,000)
125,000 Total before tax
(43,750) Tax expense
$ 81,250 Net of tax3
Amortization of defined benefit pension items
Prior service costs $ (10,000) 2
Transition obligation (25,000) 2
Actuarial (losses) (15,000) 2
(50,000) Total before tax
17,500 Tax benefit
$ (33,500) Net of tax3
1
Amounts in parentheses indicate debits in profit/loss
2
These AOCI components are included in the computation of net periodic pension cost.
(See Note X)
3
Amount agrees with amount reported as reclassifications from AOCI in the disclosure
about changes in AOCI balances
© 2013 Ernst & Young LLP Page 10 Ernst & Young Q1 2013 financial reporting update
11. Opinion check
Where do you plan to present significant
amounts reclassified out of accumulated
other comprehensive income when adopting
ASU 2013-02:
A. On the face of the income statement
B. In the notes
C. Undecided
D. Does not apply (Ernst & Young, faculty,
alumni, other)
© 2013 Ernst & Young LLP Page 11 Ernst & Young Q1 2013 financial reporting update
12. Accounting standards effective for 2013
For calendar year-end companies
Public Private
Accounting standards update companies companies
ASU 2013-03 — Clarifying the Scope and
Applicability of a Particular Disclosure to Not applicable 4
Nonpublic Entities
ASU 2013-02 — Reporting of Amounts
Reclassified out of Accumulated Other 4 2014
Comprehensive Income
ASU 2013-01 — Clarifying the Scope of
Disclosures about Offsetting Assets and 4 4
Liabilities and ASU 2011-11— Disclosures about
Offsetting Assets and Liabilities
ASU 2012-07 — Accounting for Fair Value
Information That Arises after the Measurement
2012 4
Date and Its Inclusion in the Impairment Analysis
of Unamortized Film Costs
4= Effective for 2013
© 2013 Ernst & Young LLP Page 12 Ernst & Young Q1 2013 financial reporting update
13. Accounting standards effective for 2013
For calendar year-end companies (continued)
Public Private
Accounting standards update companies companies
ASU 2012-06 — Subsequent Accounting for an
Indemnification Asset Recognized at the Acquisition 2014
Date as a Result of a Government-Assisted 4
Acquisition of a Financial Institution
ASU 2012-04 — Technical Corrections and 4 2014
Improvements
ASU 2012-02 — Testing Indefinite-Lived Intangible
Assets for Impairment 4 4
ASU 2012-01 — Continuing Care Retirement 4 2014
Communities — Refundable Advance Fees
ASU 2011-10 — Derecognition of in Substance
Real Estate — a Scope Clarification 4 4
4= Effective for 2013
© 2013 Ernst & Young LLP Page 13 Ernst & Young Q1 2013 financial reporting update
14. Proxy update
Reminders for this proxy season
► Disclose whether use of compensation consultants raised
conflicts of interest
► Describe conflict and explain how it is being addressed
► Applies to compensation consultants engaged by
management or the compensation committee
► No definition of ―conflict of interest‖
► Smaller reporting companies now required to hold ―say-
on-pay‖ shareholder votes on executive compensation
► Report shareholder vote results on Form 8-K within
four days
► Disclose how frequently say-on-pay votes will occur in
an amendment to the initial Form 8-K within 150 days
© 2013 Ernst & Young LLP Page 14 Ernst & Young Q1 2013 financial reporting update
15. Proxy update
Trends in shareholder proposals
% put to %
Topics of shareholder proposals in 2013 vote voter
(through 15 March 2013)
in proxy support
(% from 2012 votes
per SEC filings)
Environmental/social
► Disclose political spending and 57% 22%
lobbying activities
► Enhance sustainability reporting 33% 29%
Board of directors
► Hold annual elections of all directors 48% 81%
► Appoint independent director as chair 73% 37%
Compensation-related
► Eliminate accelerated vesting of equity 43% 36%
awards, payments grossed-up for taxes
© 2013 Ernst & Young LLP Page 15 Ernst & Young Q1 2013 financial reporting update
16. Estimated annual effective tax rate (EAETR)
General reminders
► Make the best estimate of the annual effective tax rate
for the full fiscal year at the end of each interim period
► Use estimated annual effective tax rate to record tax on
a current year-to-date basis
► Project year-end temporary differences and
valuation allowance
► Changes in enacted tax legislation can affect EAETR
► 2 January 2013 – Retroactive reinstatement of the tax
extenders (they’re set to expire again on
31 December 2013)
► Recognized in the interim period of enactment (Q1 2013
for companies with calendar year-ends)
© 2013 Ernst & Young LLP Page 16 Ernst & Young Q1 2013 financial reporting update
17. Estimated annual effective tax rate
Interim period events
► Changes to indefinite reinvestment assertion
► Record in the interim period the change in assertion occurs
► Record tax effects related to undistributed earnings of prior
years – discrete
► Record tax effects related to current year undistributed
earnings – adjust EAETR
► Discontinued operations
► Revise EAETR applied to income from continuing
operations in current and subsequent interim periods of
current fiscal year
► Recast income taxes related to prior interim periods (as
applicable) between continuing and discontinued operations
© 2013 Ernst & Young LLP Page 17 Ernst & Young Q1 2013 financial reporting update
18. Opinion check
Which of the following events is likely to most
significantly affect your EAETR for 2013?
A. American Taxpayer Relief Act of 2012
B. Acquisitions (e.g., change in indefinite
reinvestment assertion)
C. Divestitures (e.g., discontinued operations)
D. Other or not sure
E. Does not apply (Ernst & Young, faculty,
alumni, other)
© 2013 Ernst & Young LLP Page 18 Ernst & Young Q1 2013 financial reporting update
19. Today’s agenda
► Q1 matters to consider
► Convergence projects update
► Future considerations
Join today's Twitter discussion:
#EY_Q1Update
© 2013 Ernst & Young LLP Page 19 Ernst & Young Q1 2013 financial reporting update
20. Convergence projects update
Current stage Q2 2013
Financial Instruments
FASB Exposure Draft Comment letter deadline
Classification and
measurement Exposure Draft
IASB Deliberate comments
(limited amendments)
FASB Exposure Draft Comment letter deadline
Impairment
IASB Exposure Draft Comment letter period
FASB On hold
Hedging Final Standard
Review draft
IASB (except macro hedging to be
(except macro hedging)
included in discussion paper)
FASB Drafting Exposure Draft Exposure Draft
Leases
IASB Drafting Exposure Draft Exposure Draft
FASB Drafting Final Standard Final Standard
Revenue recognition
IASB Drafting Final Standard Final Standard
© 2013 Ernst & Young LLP Page 20 Ernst & Young Q1 2013 financial reporting update
21. Financial instruments project
Classification and measurement
► Financial assets classified and Proposed
classification and
measured in one of three categories measurement
based on: model
► Instrument’s cash flow characteristics Amortized cost
► Entity’s business model for Solely principal
and interest
managing the instrument Hold to collect
► Equity instruments measured at
fair value through net income (NI) Fair value – OCI
Solely principal
► Exception: nonmarketable and interest
equity securities measured at Hold to collect and sell
―modified‖ cost
► Reclassifications permitted only Fair value – NI
upon a change in business model Residual category
© 2013 Ernst & Young LLP Page 21 Ernst & Young Q1 2013 financial reporting update
22. Financial instruments project
Classification and measurement
► Financial liabilities would generally be classified and
subsequently measured at amortized cost
► Limit on the use of the fair value option
► Changes in instrument-specific credit risk (i.e., own credit)
for financial liabilities measured at FV-NI would be
presented separately in OCI
► Public companies would parenthetically present fair value
for most instruments at amortized cost
► Comments on the proposal are due 15 May 2013
Thought Center Webcast on 21 March 2013 at 1 p.m. Eastern
© 2013 Ernst & Young LLP Page 22 Ernst & Young Q1 2013 financial reporting update
23. Financial instruments project
Credit losses (impairment)
► Applies to all financial assets that are debt instruments
measured at amortized cost or fair value through other
comprehensive income
► Examples: loans, debt securities, trade receivables
► Expected credit losses would be defined as the
contractual cash flows an entity does not expect to collect
► An estimate of expected credit losses includes:
Time value of money
Reasonable
Information Information
and
about past about current
supportable
events conditions
forecasts
At least two possible outcomes, one of which reflects a credit loss
© 2013 Ernst & Young LLP Page 23 Ernst & Young Q1 2013 financial reporting update
24. Financial instruments project
Credit losses (impairment)
► Receivables
► Historical loss rates for aging buckets may need to be
adjusted for economic forecasts
► Allowances would be required for all receivables, including
those (1) classified as current and (2) from significant
customers that have always paid
► Debt securities
► ―Most likely‖ approach prohibited for estimating credit losses
► Record allowance instead of adjusting cost basis
► Stop accruing interest when collection of substantially all of
principal and interest is no longer probable
Comments are due 30 April 2013
© 2013 Ernst & Young LLP Page 24 Ernst & Young Q1 2013 financial reporting update
25. Revenue recognition project
Status
► All major topics have been redeliberated as of February
meeting; open items include:
► Sweep issues
► Consequential amendments
► Analysis of cost versus benefit
► Final drafting to begin
► Plan to issue final standard in summer 2013
© 2013 Ernst & Young LLP Page 25 Ernst & Young Q1 2013 financial reporting update
26. Revenue recognition project
Recent decisions
Variable Contract Nonfinancial Licenses
consideration costs assets
Eliminated Reaffirmed Reaffirmed Decided to
specific decision to decision to treat licenses
guidance for require apply control as either
sales-based capitalization and ―rights‖
royalties on of direct, measurement transferred at
licensed incremental, requirements a point in time
intellectual recoverable to transfers of or promises to
property costs to nonfinancial provide
acquire a assets ―access‖ over
long-term time
contract
© 2013 Ernst & Young LLP Page 26 Ernst & Young Q1 2013 financial reporting update
27. Revenue recognition project
Disclosures
► Disaggregation of revenue
► Contract assets, liabilities and costs
► Narrative disclosures rather than tabular reconciliations
as previously proposed
► Key judgments related to variable consideration
► Remaining performance obligations (backlog)
► Interim financial statements – many of the annual
disclosures also will be required
► IASB plans to specifically require only disaggregated
revenue at interim periods
© 2013 Ernst & Young LLP Page 27 Ernst & Young Q1 2013 financial reporting update
28. Revenue recognition project
Transition and effective date
► Transition choice
► Full retrospective
► Modified retrospective approach
► Modified retrospective approach
► Prior year amounts not restated
► New guidance applied to new and existing contracts as of
effective date with a cumulative catch-up adjustment
► Disclose current-year amounts as if they were prepared
under previous revenue guidance
Tentatively effective for annual periods beginning on or
after 1 January 2017
© 2013 Ernst & Young LLP Page 28 Ernst & Young Q1 2013 financial reporting update
29. Opinion check
Which transition approach is your company
most likely to use:
A. Fully retrospective
B. Modified retrospective
C. Undecided
D. Does not apply (Ernst & Young, faculty,
alumni, other)
© 2013 Ernst & Young LLP Page 29 Ernst & Young Q1 2013 financial reporting update
30. Today’s agenda
► Q1 matters to consider
► Convergence projects update
► Future considerations
Join today's Twitter discussion:
#EY_Q1Update
© 2013 Ernst & Young LLP Page 30 Ernst & Young Q1 2013 financial reporting update
31. Private Company Council activities
Private company decision-making framework
Changes to Staff
recommendations Next steps
► Removed presumption ► Exposure draft expected
that industry-specific soon, framework to be
guidance is relevant finalized later this year
► Clarified that ―all or ► Consider exceptions
nothing approach‖ and modifications to
would not be required US GAAP
for exceptions or ► Continue work on a
modifications single definition of a
► Clarified ―red flag‖ nonpublic entity
approach for disclosures (private company)
© 2013 Ernst & Young LLP Page 31 Ernst & Young Q1 2013 financial reporting update
32. Private Company Council activities
Topics of focus
Initial agenda Research initiatives
► Recognizing and ► Stock-based compensation
measuring identifiable ► Development-stage
intangible assets acquired enterprises
in business combinations ► Accounting for interest-rate
at fair value swaps with multiple
► Consolidation of variable counterparties
interest entities
► Accounting for ―plain The PCC decided not to
vanilla‖ interest-rate swaps pursue accounting for
with single counterparties uncertain tax positions
FASB Exposure Final FASB Changes to
Deliberations Redeliberations
endorsement draft endorsement US GAAP
© 2013 Ernst & Young LLP Page 32 Ernst & Young Q1 2013 financial reporting update
33. Other standard-setting activities
Active projects Current stage
Investment companies ► Final standard expected Q1
Consolidation ► Final standard expected Q2
Liquidation basis of
► Final standard expected Q1
accounting
Repurchase agreements
► Exposure draft issued Q1
and similar transactions
Discontinued operations ► Exposure draft expected Q1
Going concern ► Exposure draft expected Q2
Disclosure framework ► FASB is evaluating next steps
© 2013 Ernst & Young LLP Page 33 Ernst & Young Q1 2013 financial reporting update
34. EITF update
No. Issue addressed Status
11-A Release of cumulative translation adjustment when a parent no longer Final ASU
controls a consolidated foreign entity 2013-05
12-B Personnel services received from an affiliate of a not-for-profit entity Final
for which the affiliate does not seek compensation consensus
12-D Recognition, measurement, and disclosure of obligations resulting Final ASU
from joint and several liability arrangements 2013-04
12-F Application of pushdown accounting in certain circumstances Discussions
12-G Accounting for the excess in the fair value of assets over liabilities of a Final
consolidated collateralized financing entity consensus
12-H Accounting for service concession arrangements Discussions
13-A Inclusion of the federal funds effective swap rate as a benchmark Proposed
interest rate for hedge accounting purposes ASU
13-B Accounting for investments in affordable housing tax credits Consensus-
for-exposure
13-C Presentation of a liability for an unrecognized tax benefit when a net Proposed
operating loss or tax credit carryforward exists ASU
© 2013 Ernst & Young LLP Page 34 Ernst & Young Q1 2013 financial reporting update
35. EITF update – Accounting for cumulative
translation adjustments (CTA)
Transactions involving an investment in a foreign entity
Sale of an ownership interest in a consolidated foreign entity
Loss of control Release all of CTA
Retained control Do not release CTA
(treat as equity transaction)
Sale of an ownership interest in a foreign entity Release pro-rata portion of
that is an equity method investment CTA
Step acquisition (gaining control) Release all of CTA
Transactions within a foreign entity
Substantial liquidation?
Sale of a subsidiary that is a nonprofit No Do not release CTA
activity or a business
Yes Release all of CTA
Sale of a group of assets that is a No Do not release CTA
nonprofit activity or a business Yes Release all of CTA
© 2013 Ernst & Young LLP Page 35 Ernst & Young Q1 2013 financial reporting update
36. EITF update – Inclusion of the fed funds effective swap
rate as a benchmark interest rate for hedge accounting
Allowed benchmark
interest rates in the US for
hedge accounting
Federal funds effective swap rate
► Would apply ► Interest rates on direct
prospectively to Treasury obligations of the
qualifying new or US government
redesignated hedging
► London Interbank Offered
relationships entered
Rates (LIBOR)
into on or after adoption
► Would not alleviate
ineffectiveness for
existing hedges Comments due 22 April 2013
© 2013 Ernst & Young LLP Page 36 Ernst & Young Q1 2013 financial reporting update
37. SEC update
Current activities
► SEC Advisory Committee on Small and Emerging
Companies recommendations to the SEC:
► Increase smaller reporting companies (SRC) definition
to increase to $250M float from $75M
► Expand reporting relief for SRCs
► Permit increased ―tick size‖ for smaller listed companies
► Encourage creation of new equity market
► Statement to Congress to exempt SRCs from conflict
minerals disclosure requirements
► NASDAQ proposed rule requiring listed companies
to have internal audit function
© 2013 Ernst & Young LLP Page 37 Ernst & Young Q1 2013 financial reporting update
38. SEC update
Other SEC rulemaking
Topic Current status
► Final rule issued August 2012
Conflict minerals ► Effective 2013 – First Form SD
(Dodd-Frank) due 2 June 2014
► Current legal challenge
General solicitation and ► Proposed rule – August 2012
advertising rule (JOBS Act) ► Awaiting final rule
―Bad actor‖ rule ► Proposed rule – May 2011
(Dodd-Frank) ► Awaiting final rule
Review of Regulation S-K
disclosures for emerging
► Report to Congress pending
growth companies
(JOBS Act)
© 2013 Ernst & Young LLP Page 38 Ernst & Young Q1 2013 financial reporting update
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The Ernst & Young Q1 2013
financial reporting update
Co-sponsored with Financial
Executives International