In 2016, the Financial Accounting Standards Board (FASB) released 20 accounting standards updates (ASUs). Among the more significant were changes to leasing, financial instruments and the not-for-profit reporting model. Despite the completion of many significant projects, the FASB will likely remain active during 2017. Presently, it has 26 active projects, the most significant of which may be considered the proposed changes to hedge accounting originally issued in the third quarter of 2016. During the fourth quarter of 2016 and first couple weeks of 2017, the FASB issued seven accounting standards updates.

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A publication of the Professional Standards Group
January 2017
Lay of the Accounting Landscape: Definition of a Business and Other Topics
In 2016, the Financial Accounting Standards Board
(FASB) released 20 accounting standards updates
(ASUs). Among the more significant were changes
to leasing, financial instruments and the not-for-profit
reporting model.
Despite the completion of many significant projects,
the FASB will likely remain active during 2017.
Presently, it has 26 active projects, the most significant
of which may be considered the proposed changes
to hedge accounting originally issued in the third
quarter of 2016. During the fourth quarter of 2016 and
first couple weeks of 2017, the FASB issued seven
accounting standards updates.
Definition of a Business
The first accounting standard update of 2017 clarified
the definition of a business and should result in fewer
transactions being treated as business combinations
under ASC Topic 805 guidance. Three significant
revisions were made to current U.S. GAAP, including
the application of a “screen,” changes to the
definition of an output, and the evaluation of inputs
and processes required for a business to exist. The
changes are the first phase of three phases. Future
standard setting activity will look at partial sales and
transfers, as well as recognition and derecognition
principles to consider and whether alignment of the
guidance between transactions involving a business
and those involving assets are warranted. Learn more.
Consolidations
Revisions to the consolidation guidance were effective
for the 2016 calendar year for public business entities
and become effective for all other entities in 2017. After
issuance of the revision, several questions arose to
the application of certain components of the guidance
resulting in two accounting standards updates.
The first, ASU 2016-17 Consolidation (Topic 810):
Interests Held Through Related Parties That Are
under Common Control, clarifies when an entity
consolidates a variable interest entity (VIE). When
determining the primary beneficiary of a variable
interest entity (VIE), the reporting entity that is a
single decision maker considers if it has an obligation
to absorb losses or right receive benefits that could be
significant to the VIE. After the revision in ASU 2016-
17, in evaluating this condition the reporting entity only
considers its proportionate interest of entities under
common control. For example, say a reporting entity
has a 25 percent interest in its sister entity, and the
sister entity has a 40 percent interest in a VIE. The
reporting entity would include a 10 percent interest in
a VIE in its evaluation of its ability to absorb losses or
receive benefits.
The second update, ASU 2017-02, Not-for-Profit
Entities-Consolidation (Subtopic 958-810) clarifies
when a not-for-profit that is a general partner or a
limited partner should consolidate a for-profit limited
partnership.Undertherevisedconsolidationguidance,
a not-for-profit entity that is the general partner in
a limited partnership would have deconsolidated
certain limited partnerships previously consolidated.
ASU 2017-02 corrects this issue by retaining
the presumption that a general partner should
consolidate a limited partnership under the voting
model guidance. The presumption can be overcome
by either substantive kick-out rights or substantive
participating rights held by a limited partner.

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Copyright ©2017, Mayer Hoffman McCann P.C. All rights Reserved.
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
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Intra Entity Transfers
ASU 2016-16 Income Taxes- Intra-Entity Transfers
simplifies the accounting for transfers of assets
between tax-paying components within an entity.
It requires the reporting entity to recognize the tax
impact of an internal asset transfer between different
tax jurisdictions at the time of the transfer, excluding
transfers of inventory. The accounting standard takes
effect for public business entities after Dec. 15, 2017
and all other entities for annual periods beginning
after Dec. 15, 2018. It will be adopted using a modified
retrospective application. Early adoption is permitted.
Learn more.
Other FASB Projects
During the fourth quarter of 2016 the FASB also issued
two accounting standards updates on its continuing
project for addressing technical corrections to US
GAAP. The technical corrections addressed various
issues including fair value disclosures related to
valuation techniques and approaches and corrections
to the new guidance on revenue from contracts with
customers (Topic 606). Learn more.
The FASB has also made several recent proposals
to improve US GAAP, including exposure drafts
addressing inventory disclosures, the treatment of
down round provisions when distinguishing debt from
equity instruments (learn more) and the simplification
of the classification of debt between current and
noncurrent liabilities.
The proposed changes for the classification of
debt include an overarching principle to replace the
existing rules based approach. The principle is that
debt is classified as noncurrent in a classified balance
sheet if either it is contractually due more than one
year after the balance sheet date, or the reporting
entity has the contractual right to defer payment
for at least one year from the balance sheet date.
An exception to the principle would be created to
permit debt due on demand as a result of a covenant
violation to be classified as noncurrent if a waiver is
obtained prior to when the financial statements are
issued or available for issuance and the waived debt
is contractually due, or payment can contractually be
deferred for, more than one year from the balance
sheet date. Debt classified as noncurrent as a result
of the exception would be presented separately from
other debt. A significant change that would result from
the proposed principle is that debt due within one year
from the balance sheet date that is refinanced prior to
the financial statements being issued or available for
issuance would be presented as current even if the
revised terms of the debt is that it is now contractually
due more than one year after the balance sheet date.
EITF Initiatives
Restricted Cash
On Nov. 17, 2016, the FASB released the final
accounting standards update clarifying the
presentation of restricted cash in the cash flow
statement, which was EITF Issue. No. 16-A. The
final accounting standard update resolves the
presentation and disclosure requirements for
restricted cash, but does not define restricted cash.
Entities will be required to include restricted cash
and cash equivalents in the beginning and ending
cash on their cash flow statement alongside cash
and cash equivalents. Disclosures will be required to
describe the nature of the restriction and the amount,
by balance sheet line item, of the restricted cash and
restricted cash equivalents. The standard takes effect
for public business entities after Dec. 15, 2017 and all
other entities after Dec. 15, 2018. It must be applied
retrospectively. Early adoption is permitted.
Open Issues
Still under consideration are EITF Issue No. 16-B:
Employee Benefit Plan Master Trust Reporting and
EITF Issue No. 16-C: Determining the Customer of
the Operation Services in a Service Concession
Arrangement.

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Copyright ©2017, Mayer Hoffman McCann P.C. All rights Reserved.
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please
contact your MHM auditor to further discuss the impact on your audit or audit report.
The proposed changes under EITF Issue No. 16-C
include clarifying that the grantor (governmental
entity) of the operation services would be considered
the customer in instances where the service being
provided benefits a third party (such as operation
services for an interstate tollway), so long as the
arrangement met the conditions of ASC Topic 853,
Service Concession Arrangements.
During its November meeting, the EITF voted to draft
the accounting standards update for Issue No. 16-B,
and agreed not to address whether reporting entities
should supply other GAAP disclosures, including ASC
Topic 820, Fair Value and ASC Topic 815, Derivatives
and Hedging. The final standard is expected in the
first quarter of 2017.
Other Items to Note
ASU 2014-15, Presentation of Financial Statements-
Going Concern (Topic 205-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as
a Going Concern takes effect for the 2016 calendar
year financial statements. Entities will need to evaluate
their ability to continue as a going concern within one
year from when the financial statement is issued or
available to be issued.
The guidance also clarifies when management must
disclose the existence of substantial doubt about its
ability to continue as a going concern. Substantial
doubt is considered to exist when conditions and
events, that when taken in the aggregate, indicate
it is probable that an entity will not be able to meet
its obligations. When substantial doubt exists
management evaluates plans for how to alleviate that
doubt, whether the plans will be implemented and
whether the plans will be effective in alleviating the
substantial doubt about an entity’s ability to continue
as a going concern. The results of the evaluation
process are included in the disclosures.
In addition, the FASB codified an announcement made
by the staff of the Securities Exchange Commission
(SEC) in ASU 2017-03, Accounting Changes and Error
Corrections (Topic 250) and Investments—Equity
Method and Joint Ventures (Topic 323): Amendments
to SEC Paragraphs Pursuant to Staff Announcements
at the Sept. 22, 2016 and Nov. 17, 2016 EITF Meetings
(SEC Update). In the statements, the staff clarified the
requirements for registrants related to disclosure about
the expected effect on the financial statements and
the progress made on implementation for accounting
standards not yet adopted. Specifically cited are the
accounting standards updates on revenues from
contracts with customers (Topic 606), Leases (Topic
842) and the Financial Instruments - Credit Losses
(Topic 326). Learn more.
Several standards relevant for financial statement
reporting are effective for 2016 and 2017. We discuss
several of these standards in Accounting Updates
That Impact 2016 Financial Reporting and Does Early
Adoption of an Accounting Standard Make Sense for
Your Company?
For More Information
MHM will continue to monitor accounting standards
updates and help you determine the impact the
accounting changes will have on your organization.
For more information on these subjects, please see
our webinar or contact Mark Winiarski of MHM’s
Professional Standards Group. Mark can be reached
at mwiniarski@cbiz.com or 816.945.5614.