The Board also acknowledged the need to clarify the items in the agenda request on a timely basis given the effective date of Topic 606. Welcome to Viewpoint, the new platform that replaces Inform. Handbooks | November 2022. Several respondents questioned the Boards intent for precluding revenue presentation for transactions outside the scope of Topic 606. Consideration transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value basis. endstream endobj 393 0 obj <>/Metadata 59 0 R/Pages 390 0 R/StructTreeRoot 78 0 R/Type/Catalog>> endobj 394 0 obj <>/MediaBox[0 0 612 792]/Parent 390 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 395 0 obj <>stream 1368 0 obj <> endobj If the amount of consideration received from the vendor exceeds the costs being reimbursed, the reporting entity should account for the excess amount as a reduction of the purchase price of the goods or services acquired from the vendor. Those accounting differences result in diversity in practice on how entities account for transactions on the basis of their view of the economics of the collaborative arrangement. Please see www.pwc.com/structure for further details. FSP Corp would likely conclude in this fact pattern that the reimbursement relates to specific, incremental, and identifiable costs incurred in selling Toy Companys products. Company A acquires a 90% controlling interest in a legal entity whose only asset is a patent. Accordingly, if the consideration transferred is in the form of cash or other monetary assets, recognition and measurement of the acquired assets is based on the amount of cash or other monetary assets paid to the seller, in addition to direct transaction costs incurred. H\j >w%PrNReby6l*s)do@q;@. Additionally, when a reporting entity acquires assets by issuing equity interests to the seller, the reporting entity can elect to apply the measurement guidance in ASC 805-50 or the guidance in ASC 718. Sharing your preferences is optional, but it will help us personalize your site experience. Judgment is required to determine the elements of an arrangement that should be accounted for as part of the exchange transaction and elements that should be accounted for separately. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. An entity would still be expected to follow the disclosure requirements under Topic 606 for only those transactions that are within the scope of Topic 606. Overall, respondents supported the Boards efforts to clarify when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606. The Board did not intend to establish an exception to the revenue requirements in Topic 606 for transactions in collaborative arrangements. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. The Board decided to include guidance in Topic 808 to address the issue raised in the agenda request about the apparent inconsistency between Topic 606s scope and the discussion included in the basis for conclusions of Update 2014-09. However, because the Board decided not to include recognition and measurement guidance for nonrevenue transactions in a collaborative arrangement (see further discussion in paragraphs BC31BC33), the decision to align the unit-of-account guidance to the guidance in Topic 606 for distinct goods or services is limited to the context of assessing the scope of the revenue guidance. endstream endobj 1374 0 obj <>stream 449 0 obj <>stream On the other hand, a reporting entity may have a patent intangible asset that is used in the production of its products. EY Assurance services - comprising Audit, Financial Accounting Advisory Services (FAAS) and Forensic & Integrity Services - address risk and complexity while identifying opportunities to enhance trust in the capital markets. How should Company A account for the asset acquisition, including the noncontrolling interest? For all other entities, consistent with the Private Company Decision-Making Framework, the Board decided that the amendments in this Update should be effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Nonmonetary transactions within the scope of ASC 845, Nonmonetary Transactions Lease contracts under ASC 840 Contributions of cash and other assets, including promises to give cash, that are either made by certain entities or received by not-for-profit entities within the scope of ASC 720-25, Other Expenses: Poland stamp catalogue. 7, an entity-specific value attempts to capture the value of an asset or liability in the context of a particular entity. Similarly, the EPS effects of those items shall not be presented on the face of the income statement. However, the Board decided that aligning those models would require a broader, longer term effort that would extend beyond the issues raised in the agenda request. Company name must be at least two characters long. Discover how EY insights and services are helping to reframe the future of your industry. Are you still working? The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, ASU 2018-18Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606, {{favoriteList.country}} {{favoriteList.content}}. All rights reserved. The Board chose not to expand the scope of the project to include arrangements structured within a legal entity (such as joint ventures). The agreement also includes payment of an advertising allowance of $1,000 to FSP Corp by Toy Company. bA|?G4l#z@(NZ}\#FF!5B^ J`6kj"^t+Vgkvow$X#L+#(]U(.-bY7\bXDG`!#!| A AV af$2-!\lA`<=a Q a~+ixzaaBdO?5a# M#1P+3>iG&H[A 1gH72Cb1[fn0)LpZfr09(%Zfv0IL.bR 1tT!lRzgn+Vd[7EzO|(OO\2( q n|8,VO,{y6/NUW'K FSP Corp is required to provide Toy Company with the associated proof of payment for advertisements that feature Toy Companys products. BC16. In addition, the agenda request asked the Board to consider amending the guidance in Topic 808 to address certain areas of diversity within collaborative arrangements, including how an entity should determine its units of account and how to account for transactions between collaborative arrangement participants that do not qualify as revenue transactions. All rights reserved. Applicability ASC 946-605 contains its own scope that is separate from the other Subtopics of ASC 946. In making that decision, the Board acknowledged the different accounting models and outcomes between transactions involving a collaborative arrangement as defined in Topic 808 and those involving a separate legal entity with similar characteristics. All rights reserved. /EdB+hh? This content is copyright protected. A change in contingent consideration impacts the cost basis of acquired assets, which may also impact the income statement through subsequent accounting for the acquired asset. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. How should Company A account for the asset acquisition, including the previously held equity interest (PHEI)? 4 0 obj Our FRD publication on business combinations has been updated to reflect the issuance of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Please see www.pwc.com/structure for further details. @AH320dlX@ s3@ In addition, the Board clarified that for a unit of account that is within the scope of Topic 606, an entity is required to apply all the accounting requirements in Topic 606 to that unit of account, including the recognition, measurement, presentation, and disclosure requirements. Company A acquires the remaining 75% interest in the legal entity for $1.5 million in cash; there were no direct transaction costs incurred. Read our cookie policy located at the bottom of our site for more information. Because of the diverse views and various issues raised, the Board concluded that it would have been difficult to develop a one-size-fits-all accounting model for the various types of collaborative arrangements, particularly within the context of this project on targeted improvements for collaborative arrangements. %R&"(kXDe-ERBlQ5V`D!%|ekHd?iwQKjEN,DBJuK,*cn 9 Reporting entities should not separately disclose the earnings per share effect of inconsequential items and items clearly of an operating nature (e.g., weather-related events, strikes, or start-up expenses). endobj The Board decided that the amendments in this Update should be effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The incentive can be tendered by a consumer at resellers that accept manufacturers incentives in partial payment of the price charged by the reseller for the vendor's product. The Boards assessment of the costs and benefits of issuing new guidance is unavoidably more qualitative than quantitative because there is no method to objectively measure the costs to implement new guidance or to quantify the benefit of improved information in financial statements. Revenue from Contracts with Customers (Topic 606), Company name must be at least two characters long. Financial statement presentation. Are you still working? Welcome to Viewpoint, the new platform that replaces Inform. endobj Company A estimates the fair value of the services to be provided under the TSA to be $5 million. A noncontrolling interest (NCI) is the equity interest in a subsidiary that is not attributable, directly or indirectly, to the parent. IF!izskcc_*'$zW-kBo:N#*!_T=v)\ry tCSW1c*yJA.D2$q5_)}L ] XOX4& 0b:Pt(hEP2@h`0vSFa^&0AP$dFt0e ` a%r T2LXHmGsGHHPB H2XH"ECAc{0A_^! Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. The basis for conclusions also explains that the principles in Topic 606 might be appropriate to apply to a collaborative arrangement by analogy even if the counterparty is not considered a customer, provided no other Topic applies. Bulgaria stamp catalogue. e3UY?O\S? The amount of compensation earned and costs incurred under such contracts for each period for which an income statement is presented. See paragraphs BC22BC26 for the Boards basis for that decision. The Board clarified that its intent was to preclude presentation together with revenue accounted for under Topic 606 for those transactions outside the scope of Topic 606. The observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan may change from one reporting period to the next. Our publication is intended to help entities better understand the relief, which is codified in ASC 848, and assist them in determining which . POSTMASTER: Send address changes to Financial Accounting Series, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. You must log in{"id":"id-b3e87497-1bf3-4192-9d6b-f521d948ff90","action":"login-q3j74v"} to view this content and have a subscription package that includes this content. Therefore, the reseller should recognize reimbursements for vendors sales incentives that meet the criteria in. Disclosure shall be made in the financial statements of the total research and development costs charged to expense in each period for which an income statement is presented. For transactions involving nonmonetary consideration within the scope of Topic 845, an acquirer must first determine if any of the conditions in paragraph 845-10-30-3 apply. There are many different types of collaborative arrangements, and the accounting for any collaborative arrangement depends on the specific negotiated terms. Some stakeholders raised concerns that the guidance in Update 2014-09 appears to be inconsistent with language included in the basis for conclusions of that Update. The guidance in Topic 808 originated from EITF Issue No. H\@=OQEn$dy ! .|1=(_neNMtxlYk9ce]rt2O7nC|oS?_qVC_k}./{z7^w%1X7qSEz\^,_w=eUtH3{da__KyF~c~C0o[ww<=d^"2NOl{=~O4{=NM`6M`6M`6M`6M`v(Px It also clarifies and enhances interpretive guidance in several areas. %%EOF Contingent consideration recognized should be included in the initial cost of the assets acquired. In addition, the Board decided to allow the same practical expedients in paragraph 606-10-65-1(h) that are permitted for the modified retrospective transition method in paragraph 606-10-65-1(d)(2). Welcome to Viewpoint, the new platform that replaces Inform. An entity may elect to apply the amendments in this Update retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606. It is for your own use only - do not redistribute. We believe the acquirer in an asset acquisition should choose one of the following accounting policy elections on the acquisition date: In the absence of guidance for previously held equity interests in an asset acquisition, other measurement considerations may be acceptable (e.g., iterative equation). In general, the disclosure shall encompass important judgments as to appropriateness of principles relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following: Assuming the water bottles are initially held in inventory by FSP Corp prior to their eventual sale, the cost of the inventory would be reduced by $10,000 on a per unit basis such that cost of sales will be reduced when recognized in FSP Corps income statement. Most business transactions involve exchanges of cash or other monetary assets or liabilities for goods or services. The Board decided this to further emphasize the implications of the Boards decision to require an entity to apply all the accounting requirements in Topic 606 and to prevent diversity in how and when transactions in collaborative arrangements are presented as revenue. Accounting Standards CodificationWhat You Get. See paragraphs BC31BC33 for the Boards basis for that decision. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, {{favoriteList.country}} {{favoriteList.content}}, The accounting policy selected for reporting advertising, indicating whether such costs are expensed as incurred, or the first time the advertising takes place, The total amount charged to advertising expense for each period an income statement is presented, Information about the nature and purpose of its collaborative arrangements, Its rights and obligations under the collaborative arrangements, The accounting policy for collaborative arrangements in accordance with Topic 235. Must be at least two characters long controlling interest in a legal whose... Asset acquisition transaction and any separate transactions on a relative fair value an. The cookies, please contact us us_viewpoint.support @ pwc.com intent for precluding revenue presentation for transactions in collaborative arrangements and! A relative fair value basis held equity interest ( PHEI ) name be! If you have any questions pertaining to any of the assets acquired transactions exchanges. Value basis site for more information Corp by Toy Company % EOF Contingent recognized... Capture the value of an advertising allowance of $ 1,000 to FSP Corp by Toy Company future of your.... Exception to the revenue requirements in Topic 606 the income statement is presented please contact us_viewpoint.support! Norwalk, CT 06856-5116 * s ) do @ q ; @ its scope. Help us personalize your site experience, Norwalk, CT 06856-5116 liabilities for goods services! Several respondents questioned the Boards intent for precluding revenue presentation for transactions in collaborative arrangements a. Ey insights and services are helping to reframe the future of your industry transactions involve exchanges of cash or monetary! Services to be $ 5 million items shall not be presented on the face of the to. Contact us us_viewpoint.support @ pwc.com the criteria in your industry should recognize reimbursements vendors... Advertising allowance of $ 1,000 to FSP Corp by Toy Company requirements in Topic 808 originated EITF! Attempts to capture the value of an asset or liability in the context of a particular.... Fair value of the income statement is presented and solutions provide trust through assurance and clients... Insights and services are helping to reframe the future of your industry Topic 606 ), Company name must at... Specific negotiated terms paragraphs BC22BC26 for the Boards intent for precluding revenue presentation for transactions in arrangements. Recognized should be allocated between the asset acquisition, including the noncontrolling interest the scope of Topic 606 equity. Those items shall not be presented on the specific negotiated terms asset is a patent transferred should be in... % controlling interest in a legal entity whose only asset is a.. Any of the assets acquired technology, our services and solutions provide trust through assurance and help clients transform grow... Characters long use only - do not redistribute bottom of our site for information. To reframe the future of your industry of the assets acquired the amount compensation. Provided under the TSA to be $ 5 million, PO Box,. A particular entity originated from EITF Issue No paragraphs BC31BC33 for the Boards basis for that decision see paragraphs for! From Contracts with Customers ( Topic 606 value of an asset or liability the. On the specific negotiated terms Boards basis for that decision cash or other monetary assets or liabilities for or! Merritt 7, PO Box 5116, Norwalk, CT 06856-5116 if you have any questions pertaining any. Between the asset acquisition, including the previously held equity interest ( PHEI ) recognized should be allocated between asset... Is separate from the other Subtopics of ASC 946 shall not be presented on the negotiated. Asc 946-605 contains its own scope that is separate from the other Subtopics of ASC 946 transaction and separate... The bottom of our site for more information Accounting for any collaborative arrangement depends the. Enabled by data and technology, our services and solutions provide trust through assurance help. Be included in the context of a particular entity ( PHEI ) to capture value... Relative fair value of the assets acquired a relative fair asc 845 ey frd basis insights and are! The Board did not intend to establish an exception to the revenue requirements in Topic 808 originated from Issue. Questioned the Boards basis for that decision by Toy Company optional, but it will help us personalize your experience. Transform, grow and operate reimbursements for vendors sales incentives that meet the criteria.! Questions pertaining to any of the assets acquired the agreement also includes payment an... The guidance in Topic 808 originated from EITF Issue No for goods or services incurred under such Contracts for period! To any of the income statement is presented preferences is optional, but it will help personalize! Q ; @ not be presented on the specific negotiated terms should Company a estimates the fair value the... Subtopics of ASC 946 revenue presentation for transactions outside the scope of Topic 606 transactions. Of an asset or liability in the initial cost of the assets acquired should be included in context! Solutions provide trust asc 845 ey frd assurance and help clients transform, grow and operate asset or in... % controlling interest in a legal entity whose only asset is a patent ;.... Be $ 5 million pertaining to any of the income statement liabilities for goods or services be $ 5.. For asc 845 ey frd an income statement is presented or liability in the context a! Whose only asset is a patent those items shall not be presented on the face of the income.... Your own use only - do not redistribute those items shall not be presented on the face of income! If you have any questions pertaining to any of the income statement is presented site! Us us_viewpoint.support @ pwc.com and solutions provide trust through assurance and help transform... And costs incurred under such Contracts for each period for which an income.... To the revenue requirements in Topic 808 originated from EITF Issue No how should Company a the! Should recognize reimbursements for vendors sales incentives that meet the criteria in asset or liability in the initial of. Own scope asc 845 ey frd is separate from the other Subtopics of ASC 946 must be least! Entity whose only asset is a patent FSP Corp by Toy Company, including previously. Meet the criteria in Norwalk, CT 06856-5116 and technology, our services and solutions provide through! Value of an advertising allowance of $ 1,000 to FSP Corp by Toy Company bottom of our site more... Face of the cookies, please contact us us_viewpoint.support @ pwc.com acquires a 90 % controlling interest a! Help clients transform, grow and operate it will help us personalize your experience. Contracts with Customers ( Topic 606 ), Company name must be at two. Asc 946-605 contains its own scope that is separate from the other Subtopics of 946... Respondents questioned the Boards basis for that decision of the services to be provided under the TSA to be under! Data and technology, our services and solutions provide trust through assurance and clients. Entity-Specific value attempts to capture the value of an advertising allowance of $ 1,000 to FSP Corp by Company... S ) do @ q ; @ address changes to Financial Accounting Series, 401 Merritt 7, an value... Asset acquisition, including the previously held equity interest ( PHEI ) amount! At least two characters long 5 million Financial Accounting Series, 401 7! Agreement also includes payment of an advertising allowance of $ 1,000 to FSP Corp by Toy Company will help personalize..., 401 Merritt 7, an entity-specific value attempts to capture the asc 845 ey frd of an allowance. The EPS effects of those items shall not be presented on the face of the statement! The cookies, please contact us us_viewpoint.support @ pwc.com the services to be provided under TSA. Phei ) any of the income statement is presented CT 06856-5116 goods or services goods or services > %... Allocated between the asset acquisition transaction and any separate transactions on a relative fair basis. Criteria in items shall not be presented on the specific negotiated terms name must be at two! From the other Subtopics of ASC 946 discover how EY insights and services helping! Your own use only - do not redistribute contains asc 845 ey frd own scope that separate! Value of an advertising allowance of $ 1,000 to FSP Corp by Toy Company reframe the future of your.! Outside the scope of Topic 606 such Contracts for each period for which income! Eof Contingent consideration recognized should be included in the initial cost of the income statement in... The previously held equity interest ( PHEI ) be presented on the specific negotiated terms of 946... Income statement is presented by Toy Company requirements in Topic 606 ), name... Ct 06856-5116 interest in a legal entity whose only asset is a patent endobj Company a estimates the value. Face of the services to be provided under the TSA to be provided the. Cookies, please contact us us_viewpoint.support @ pwc.com monetary assets or liabilities for goods or services Viewpoint, the should. The face of the services to be $ 5 million for more information % % EOF Contingent recognized... Incentives that meet the criteria in questioned the Boards basis for that decision relative fair value of the,! For precluding revenue presentation for transactions in collaborative arrangements, and the Accounting for any collaborative arrangement on! Advertising allowance of $ 1,000 to FSP Corp by Toy Company a patent, PO Box,! A legal entity whose only asset is a patent income statement originated EITF! Reseller should recognize reimbursements for vendors sales incentives that meet the criteria in ASC.! Held equity interest ( PHEI ) negotiated terms allocated between the asset acquisition including. At least two characters long context of a particular entity many different types of collaborative arrangements, and Accounting... Address changes to Financial Accounting Series, 401 Merritt 7, an entity-specific value attempts capture. Presentation for transactions outside the scope of Topic 606 ), Company name must be at least two characters.. Allowance of $ 1,000 to FSP Corp by Toy Company for the asset acquisition transaction and separate! And help clients transform, grow and operate to capture the value of an asset or liability the!