More Accounting Changes Coming

Carl Chatto, Managing Principal
December 2012

There is another batch of accounting pronouncements for companies and not-for-profit organizations that will take effect for calendar year 2012 financial statements or later.

Here is a summary of the changes we think will be of interest to our clients and friends.

The presentation of comprehensive income will change based on new FASB guidance (ASU 2011-05). Currently, many companies present the components of other comprehensive income (such as changes in unrealized gain on available for sale securities and changes in foreign currency translation) in the statement of stockholders’ equity. The new requirement is to present that activity either as part of the income statement or in a separate statement immediately following the income statement. For public companies, the requirement is effective for years and interim periods within those years beginning after December 15, 2011; for nonpublic companies it is effective for years ending after December 15, 2012. Early adoption is permitted. Note that certain disclosure provisions were deferred by ASU 2011-12.

For financial institutions and other lenders, there is new guidance about troubled debt restructurings that can be found in ASU 2011-02. This guidance is to assist creditors in determining whether a loan modification is a troubled debt restructuring. For public entities the guidance is already in effect. For nonpublic entities the guidance is effective for periods ending after December 15, 2012.

There are two amendments relating to health care providers. ASU 2011-07 requires health care entities which recognize significant amounts of patient service revenue when services are rendered, even though they don’t assess the patient’s ability to pay, to present the provision for bad debts as a reduction of patient service revenue; this should be retrospective for all years presented. For nonpublic entities, this is effective for years ending after December 15, 2012. ASU 2012-01 clarifies that an entity should classify an advance fee as deferred revenue when a continuing care retirement community has a resident contract that provides for payment of the refundable advance fee upon reoccupancy by a subsequent resident, which is limited to the proceeds of reoccupancy. For public entities (including conduit bond obligors), the amendments in this ASU are effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments are effective for fiscal periods beginning after December 15, 2013.

Entities with goodwill and indefinite lived intangible assets now have two amendments to consider. ASU 2011-08 provides the option for an entity in its annual goodwill impairment test to first assess revised qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test for indefinite-lived intangible assets other than goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.

FASB issued new guidance (ASU 2011-09) for disclosures for employers participating in a multiemployer pension or other postretirement benefit plan. New disclosures should be made regarding various matters such as the name of the plan, the employer’s level of participation in the plan, amount of contributions, and the funded status of the plan. For nonpublic entities, the changes are effective for years ending after December 15, 2012with retrospective disclosure for all years presented; public entities are required to adopt a year earlier. Early adoption is permitted.

If you have questions on these changes, please contact Carl Chatto or your usual BNN contact.


Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.  If you would like to discuss these matters further, please call Carl Chatto or your usual BNN professional at 1.800.244.7444.

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