Current Accounting and Reporting Developments Webcast Series Q4

1. Current Accounting and
Reporting Developments
Webcast Series
Fourth Quarter 2015
www.pwc.com

2. PwC
Welcome
Current Accounting and Reporting Developments
2
Beth Paul
Accounting Services
Group Team Leader
Daghan Or
Partner, National
Professional Services
Group
Greg Bakeis
Partner, National
Professional Services
Group
Peter Ferraro
Partner, National
Professional Services
Group
December 16, 2015

3. PwC
Administrative matters
Current Accounting and Reporting Developments
3
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December 16, 2015

4. PwC
CPE administrative details
Current Accounting and Reporting Developments
4
To receive full 1.5 CPE credits for today’s webcast, you must be active during the entire
90 minute webcast. You will be required to answer 6 polling questions during the
webcast to verify attendance.
You will have 2 minutes to answer each timed poll. CPE is not offered for
audio only attendees or viewers of the replay.
To download the slides and polling questions, click on Resources.
Use Q&A to ask questions during the webcast, or to respond to polls manually if
you have a technical issue.
December 16, 2015

5. PwC
Today’s agenda
December 16, 2015
Current Accounting and Reporting Developments
5
December 16, 2015
AICPA National Conference on current SEC and PCAOB Developments
Impairment and disposal issues
Measurement period adjustments
Revenue update
Standard setting update
Q&A
Year-end reminders

6. PwC
Polling question # 1
Which of the following best describes your role or responsibilities
within your organization?
A. CFO or Controller/Assistant Controller
B. Financial Reporting Director/Manager
C. Accounting or Finance Manager/Analyst
D. Tax Director/Manager
E. None of the above or PwC staff
6
Current Accounting and Reporting Developments December 16, 2015
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7. PwC
AICPA conference highlights
• Internal control over financial reporting
• Management’s discussion and analysis
• Non-GAAP measures
• Segments
• Disclosure effectiveness
• FAST Act
• Standard setting
• IFRS
7
Current Accounting and Reporting Developments December 16, 2015
December
9 – 11, 2015 in
Washington, D.C.

8. PwC
Polling question # 2
Based on your experience, why do companies include non-GAAP
measures in their SEC filings or earnings releases?
A. Because others in their industry include those non-GAAP measures
B. Because analysts are asking for them
C. Because they provide meaningful insight
D. Because management utilizes these measures in running the business and
making decisions
E. Not sure or PwC staff
8
Current Accounting and Reporting Developments December 16, 2015
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9. PwC
Segments – Chief Operating Decision
Maker (CODM)
• Information reviewed by the CODM is critical to identifying operating
segments
- CODM = the individual(s) responsible for allocating resources and
assessing performance
◦ Often the CEO or the COO, but can be a group or a function
• How are resource allocation decisions made? Consider the following:
- Organizational structure
- Internal reporting, communication, meetings
- Management style, culture
- Budgeting, compensation decisions, among other
key decisions
9
Current Accounting and Reporting Developments December 16, 2015

10. PwC
Segments – Aggregation of operating segments
Operating segments may be aggregated when they have
• Similar economic characteristics (e.g., similar long-term financial
performance)
and
• Similar (1) products/services (2) production processes (3) customer types (4)
distribution methods, and, (5) regulatory environment
Sanity check: Is aggregation consistent with
• A reasonable Investor’s expectation
• External communications (filings, releases, website, etc.)
10
Current Accounting and Reporting Developments December 16, 2015

11. PwC
Risk and uncertainties
11
Current Accounting and Reporting Developments December 16, 2015
Considerations
• Reassess financial statement and
MD&A disclosures
• Impact to significant estimates
• Evaluate significant concentrations
of risk

12. PwC
Income tax
Valuation Allowances
• Companies must consider all four sources of income
• More weight is given to information that is objectively verifiable
Indefinite Reinvestment
• The indefinite reversal exception must be re-assessed at each reporting date
• Companies are required to have a plan for reinvestment of
undistributed earnings
Uncertain Tax Positions
• Record the benefit for the amount that is more likely than not to be realized
12
Current Accounting and Reporting Developments December 16, 2015

13. PwC
Significant equity method investees:
Rule S-X 4-08(g)
Considerations
• 10% significance test (individually
and in the aggregate)
• Summarized financial information
(S-X 1-09(bb))
• Disclose for all periods
- Do not label “unaudited”
13
There is no grace period.
The summarized financial
information must be included in
the notes to the registrant’s
financial statements when those
financial statements are filed
with the SEC.
Current Accounting and Reporting Developments December 16, 2015

14. PwC
Significant equity method investees:
Rule S-X 3-09
Considerations
• 20% significance test
• Full financial statements
• Disclose for all periods
- Comparative periods are required
but may be unaudited if not
significant
14
3-09 investee financial
statements
• May not be required to comply
with certain public company
GAAP disclosures
• Required to comply with SEC
rules and interpretations
• Generally same period as the
registrant
• Required to be filed based on
the investee’s reporting
requirements
Current Accounting and Reporting Developments December 16, 2015

15. PwC
Significant equity method investees
Rules 4-08(g) and 3-09
Key reminders
• Update significance test for
retrospective changes
• Rules apply to certain investees
accounted for under the fair value
option
15
Current Accounting and Reporting Developments December 16, 2015

16. PwC
Polling question #3
Where do you think the FASB should focus its
standard-setting?
A. Performance reporting (rethinking the presentation of the
income statement)
B. Cash flows (comprehensively revisiting the cash flow statement guidance)
C. Liabilities and equity
D. Goodwill and intangibles (post-business combination accounting)
E. Other/PwC staff
Current Accounting and Reporting Developments
16
December 16, 2015
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17. PwC
Equity method of accounting – Basis differences
Basis difference
Cost of the investment (i.e., amount paid by the investor)
- Investee’s net assets (portion attributable to the investor)
Basis difference
Day 1: Perform a purchase price allocation:
• Allocate basis difference to the investee’s net assets (include
unrecognized intangibles)
• Assign residual purchase price to equity method goodwill
Day 2: Track basis differences in “memo accounts”:
• Adjust investee earnings for amortization of basis differences (generally
lowers investee earnings)
• Equity method goodwill is not amortized and is not separately tested
for impairment
17
December 16, 2015Current Accounting and Reporting Developments

18. PwC
Equity method of accounting – Basis differences
Example
• 20% equity interest:
Current Accounting and Reporting Developments
18
December 16, 2015
Purchase price $600
Investee’s net assets (20%) 400
Basis difference $200
• 20% of individual assets and liabilities:
Fair Value Carrying Value Difference
Fixed assets $600 $500 $100
Trade name (unrecognized
in the f/s)
$50 - $50
Liabilities $(100) $(100) -
• Basis difference allocation:
Fixed assets
Trade name
Goodwill
Total
$100 ($10 incremental amortization over 10 years)
50 (may be indefinite-lived)
50 (not amortized, not impaired separately)
$200

19. PwC
Debt modification with a change in principal –
Change in practice
Current Accounting and Reporting Developments
19
December 16, 2015
• Relates to the accounting for
unamortized costs and new fees when the
principal balance changes
• Apply prospectively to loans modified
after March 23, 2015
• See section 3.4.5 of our guide, Financing
transactions: debt, equity and the
instruments in between for further
information and examples
Modification accounting
Unamortized cost: No write-off
New creditor fees: Capitalize
New 3rd party fees: Expense

20. PwC
Debt issuance costs – Line-of-credit arrangements
Line-of-credit arrangements
• ASU 2015-03 does not address costs
to secure or maintain line- of-
credit arrangements
• It continues to be appropriate to
present such fees as an asset on the
balance sheet
- For example, if a borrower had a
line-of-credit with $0 drawn, it
would not be appropriate to
present the related commitment
fees as a contra liability even if
there is other debt outstanding.
Current Accounting and Reporting Developments
20
December 16, 2015

21. PwC
Age of financials (S-X 3-12)
• 45 day limit, regardless when 10-K is due
• Relief under S-X 3-01(c) if all criteria are
met
- All required Securities Exchange Act
reports filed
- Expect to report net income attributable
to the registrant
- Reported net income attributable to
registrant in at least
one of the two preceding years
Current Accounting and Reporting Developments
21
December 16, 2015
If the criteria are not met,
audited financial statements
for the most recently
completed year would need
to be filed, even though it is
before the Form 10-K due
date.

22. PwC
Polling question #4
Which of the following standards effective in 2016 do you expect to
have the most significant impact on your company?
A. Consolidation guidance
B. Cloud computing guidance
C. Debt issuance costs
D. Measurement period adjustments
E. None of the above/PwC staff
Current Accounting and Reporting Developments
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December 16, 2015
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23. PwC
Impairment of long-lived assets:
Held and used model
Trigger-based test:
• Are there indicators that asset group may not
be recoverable
• A more-likely-than-not disposal is an example trigger
If triggered, perform recoverability test
(Step 1):
• Calculate undiscounted cash flows (from the use and
eventual disposition of the asset group)
• Compare carrying amount to the sum of
undiscounted cash flows
If carrying amount is not recoverable:
• Calculate fair value of the asset group
• Allocate impairment (carrying amount less fair value)
to long-lived assets ratably
Current Accounting and Reporting Developments
23
December 16, 2015

24. PwC
Impairment of long-lived assets:
Held for sale model
• Consider held-for-sale classification when there is a plan to
sell an asset (or a business) or group of assets (or businesses)
- Applies only to a sale transaction.
- Does not apply other disposal transactions (e.g., spin offs or
abandonments)
• Specified criteria must be met for held-for-sale classification
- Commitment to a plan that is probable of resulting in a sale within
one year
- Other criteria also must be considered
• Measure disposal group at the lower of book value or fair
value less costs to sell
- Apply other GAAP first to the assets and liabilities of the disposal
group (including goodwill)
- Recognize impairment if carrying amount exceeds fair value less costs
to sell
Current Accounting and Reporting Developments
24
December 16, 2015

25. PwC
Discontinued operations
The standard:
A discontinued operation is a component or group of components that has been
disposed of or is classified as held for sale, and “represents a strategic shift that
has (or will have) a major effect on an entity’s operations and financial results.”
Current Accounting and Reporting Developments
25
December 16, 2015
Asia
(Disc Ops)
Africa
Oceania
Europe
The
Americas
Examples of a strategic shift could
include disposing of a:
• Major line of business
• Major geographical area of
operations
• Major equity method investment
• Other major parts of an entity

26. PwC
Measurement period adjustments
New standard issued
• Recognize the ‘cumulative’ impact in the period the adjustment is identified
- Do not restate prior periods
- Amount to recognize = cumulative effect on earnings including prior
period impact
- Disclose out-of-period impact
Current Accounting and Reporting Developments
26
December 16, 2015
Looking forward
• Effective in 2016 for calendar-year-end public companies; an additional year for
nonpublic companies
• Early adoption allowed
• To be applied prospectively

27. PwC
Polling question # 5
How often does your company early adopt new standards?
A. Virtually never
B. Occasionally
C. Frequently
D. Don’t know/PwC staff
Current Accounting and Reporting Developments
27
December 16, 2015
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28. PwC
Revenue recognition update – Proposed amendments
to principal vs agent guidance
(PwC In transition No. US2015-05)
Current Accounting and Reporting Developments
28
December 16, 2015
Principal vs
Agent
Assessment
Unit of
Account
Clarify
Indicators
Control in
a Service
Arrangement

29. PwC
Narrow scope improvements and practical
expedients – Proposed amendments
Current Accounting and Reporting Developments
29
December 16, 2015
FASB proposed amendments
Transition to the new standard
• Adds a practical expedient for contracts that are modified before the date of initial application
• Clarifies that a completed contract is one for which all (or substantially all) of the revenue was
recognized under legacy GAAP

30. PwC
Narrow scope improvements and practical
expedients – Proposed amendments (continued)
Current Accounting and Reporting Developments
30
December 16, 2015
FASB proposed amendments
Collectibility
• Clarifies that the collectibility assessment is not based on collecting all the consideration promised
in the contract
Noncash consideration
• Clarifies that measurement date is at contract inception
• Clarifies that variable consideration guidance only applies to variability resulting from reasons
other than form of consideration
Sales tax presentation
• Adds a practical expedient that allows companies to present revenue net of taxes collected
from customers

31. PwC
Polling question #6
When does your company plan to adopt the new revenue standard?
A. We plan to early adopt (2017) - public company
B. We plan to adopt at effective date (2018) – public company
C. We plan to early adopt (2017 or 2018) - private company
D. We plan to adopt at effective date (2019) – private company
E. Not sure/PwC staff
Current Accounting and Reporting Developments
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December 16, 2015
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32. PwC
Transition resource group update
• Meeting was held November 9, 2015
• Topics discussed:
- Customer options for additional goods and services
- Pre-production activities
- License restrictions and renewals
• Next steps
Current Accounting and Reporting Developments
32
December 16, 2015

33. PwC
EITF issues
Current Accounting and Reporting Developments
33
December 16, 2015
Issue Title Status
15-B Recognition of Breakage for Certain Prepaid Stored-Value Cards Final Consensus
15-D Effect of Derivative Contract Novations on Existing Hedge
Accounting Relationships
Final Consensus
15-E Contingent Put and Call Options in Debt Instruments Final Consensus
15-F Statement of Cash Flows: Classification of Certain Cash Receipts and
Cash Payments
Consensus-for-exposure (8 issues)
and Deliberation (1 issue)
Added
to agenda
Deliberation
Consensus
for exposure
Deliberation
Final
Consensus
Final ASU

34. PwC
EITF exposure draft on statement of
cash flows
Current Accounting and Reporting Developments
34
December 16, 2015
Impact: Reduce diversity in practice in the classification of cash flows (i.e., operating, investing,
financing) on eight issues out for exposure
Issue Consensus-for-exposure
1) Debt prepayment or extinguishment costs Financing
2) Settlement of zero-coupon bonds Operating – Interest
Financing – Principal
3) Contingent consideration payments Financing – FV of initial liability
Operating – Excess amount
4) Restricted cash None reached; in deliberation

35. PwC
EITF exposure draft on statement of
cash flows (continued)
Current Accounting and Reporting Developments
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December 16, 2015
Issue Consensus-for-exposure
5) Proceeds from insurance claims Classify based on nature of the insured loss
6) Corporate-owned life insurance policies Investing – proceeds
Operating and/or investing – premiums
7) Distributions from equity method investees Operating up to cumulative equity method
earnings, excess as investing
8) a) Beneficial interests in securitizations Disclose beneficial interests received as
noncash activity
8) b) Cash receipts from beneficial interests in
securitized trade AR
Investing
9) Predominance principle Apply when there is no specific guidance and cash
flows are not separately identifiable
.

36. PwC
Leasing project
Tentative effective date
Current Accounting and Reporting Developments
36
December 16, 2015
Public Private
Effective Date Periods beginning after
December 15, 2018
Fiscal years beginning after
December 15, 2019 and interim
periods within fiscal years beginning
after December 15, 2020
Early adoption Upon issuance of the standard Upon issuance of the standard
Transition Modified retrospective with the
ability for lessees to elect a package
of reliefs
Modified retrospective with the
ability for lessees to elect a package
of reliefs

37. PwC
Polling question #7
Based upon your experience and preference, select the area of the
audit where you would MOST like to see changes:
A. Increased automation of audit testing (e.g., data auditing)
B. Global consistency of audit processes
C. Greater auditor understanding of the company’s business and its industry
D. Smoother audit workflow
E. Enhanced transparency into the audit
F. Not applicable
Current Accounting and Reporting Developments
37
December 16, 2015
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38. PwC
Q&A session
Download The quarter close at:
http://www.pwc.com/us/qc
Current Accounting and Reporting Developments
38
December 16, 2015

39. PwC
CPE credit reminders
Current Accounting and Reporting Developments
39
December 16, 2015
Please turn off all pop up blockers before downloading and printing your own CPE certificate.
For manual responses, you will be unable to download your certificate. You can return to the
event once archived and download the certificate if eligible.
To download the slides and polling questions, click on Resources.
You can still respond to missed polls before the webcast closes. Note: you will be unable to
download your certificate. You can return to the event once archived and download the
certificate if eligible.
To receive full CPE credit for today’s webcast, you must have been active during the
entire live session and answered six polling questions. CPE is not offered for
the replay or for listen only attendees.

40. PwC
CPE certificates
• Click the CPE icon under the presentation slides
For group viewing:
• Click “Request CPE”
• Select the number of co-viewers then click Submit
• Enter group information and check the “I
attest…” box
• On the following page, click the Download
Certificate link and certificate will open
Current Accounting and Reporting Developments
40
December 16, 2015
PwC personnel that have met the requirements do not need to submit for CPE certificates as credit
will be automatically posted to Learning @ PwC

41. PwC
PwC webcasts
• Upcoming webcasts:
- Leasing - on issuance of final standard
- Debt modifications and extinguishment – Spring
2016
- Standard setting update - Spring 2016
- Impairment - on issuance of final standard
- For a full list of upcoming webcasts,
please visit CFOdirect
Current Accounting and Reporting Developments
41
December 16, 2015
• Webcasts on demand:
- CPE credit available for the replay upon passing
a quick knowledge check
• On-demand library of CPE-eligible
webcasts

42. Thank you for participating
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