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By explicitly providing unit-of-account guidance in the context of assessing the scope of the revenue guidance and aligning the unit-of-account guidance with Topic 606, the Board also sought to eliminate potential future diversity in determining units of account when assessing whether a collaborative arrangement is partially within the scope of Topic 606 or other Topics. FSP Corp will contract directly with the advertising agencies and pay for the total cost of the campaign. ASC 946-605 contains its own scope that is separate from the other Subtopics of ASC 946. The SEC staff has acknowledged that, in some cases, a reporting entity may be able to support more than one conclusion based on the existing accounting literature. 1 0 obj $F*NdOz=fv0c.5nU2.C8se6y]xw Within that context of determining whether a part of a collaborative arrangement is within the scope of Topic 606, the Board decided to include unit-of-account guidance that is consistent with the unit-of-account guidance in Topic 606 for distinct goods or services. The scope of ASC 946-605 is defined as "all . Company A would then recognize and measure the acquired patent at a total cost of $2 million, consisting of (1) $1.5 million of cash consideration transferred and (2) the $500,000 fair value of PHEI on the acquisition date. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. The Board concluded that the expected benefits of making the targeted improvements justify the expected costs. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. `d4%XfK`!beX,, 4sgD='e/0,Pdu _u4B'd.? ?oTku>vbxxJkx BC30. i8 S:HlvSfGHANN#3=b_"Y2WyI1i23"\!`TX@[lY}6QhX1VZ)}k1]-1_|;(vY RQo`e&Z`=Q+~~~J#*p*[lf$EvOdz[?vY .Rmmt(`NNM|_oE~g]`|wqZhBLSo?r|DCImT _WsFl63Z53;IQa7)amgIn/& J_s?P Some respondents requested that the Board clarify certain aspects of the proposed amendments. However, the consideration must be for reimbursement of specific, incremental, identifiable costs incurred by the reporting entity to sell the vendor's products. However, we believe settlement gains and losses relating to preexisting relationships should generally be recognized in the income statement consistent with the guidance for business combinations in, For example, assume Company A is a defendant in litigation relating to a patent infringement claim brought by Company B. Cybersecurity, strategy, risk, compliance and resilience, Value creation, preservation and recovery, Explore Transactions and corporate finance, Climate change and sustainability services, Strategy, transaction and transformation consulting, Real estate, hospitality and construction, How blockchain helped a gaming platform become a game changer, How to use IoT and data to transform the economics of a sport, M&A strategy helped a leading Nordic SaaS business grow. h1_4'n4PK7C[u9!+m{e:v!|xmaDqI"JFD+HsC%Vc1@pf@p!! For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. 78uZE~*x!o]|)Q/@;,%4yM``1mnigKNfs8YfU_)lBLf&hLU XpSTS E>AC 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, Property, plant, equipment and other assets, {{favoriteList.country}} {{favoriteList.content}}, follow the guidance for business combinations and measure NCI at fair value on the date of acquisition in accordance with. BC7. Company A determines that the transaction should be accounted for as an asset acquisition, as the legal entity acquired does not constitute a business. Our publication is intended to help entities better understand the relief, which is codified in ASC 848, and assist them in determining which . This was consistent with comments from respondents who stated that providing a year for implementation would provide entities that have extensive collaborative arrangements with adequate time to review their contracts. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a discontinued operation shall be included in income from continuing operations before income taxes in the income statement of a business entity. The Board received 27 comment letters in response to the proposed Update. Select a section below and enter your search term, or to search all click BC16. 2.2 Initial recognition (asset acquisitions), 2.4Allocating cost in an asset acquisition. The Board also decided to limit the projects scope to (a) the accounting for the entity receiving consideration from the other collaborative arrangement participant (that is, the party potentially recording revenue) and (b) transactions not directly related to sales to third parties. The targeted improvements in this Update clarify that when a transaction is within the scope of the guidance in Topic 606, an entity is required to apply all the provisions of Topic 606, including the disclosure requirements. 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). If the latter, some respondents disagreed because it would negatively affect performance measures that provide users with useful information. If a subtotal such as income from operations in presented, it shall include the amounts of those gains or losses. By continuing to browse this site, you consent to the use of cookies. Water Company provides FSP Corp with $10,000 to ensure that its products receive prominent placement on store shelves (that is, it pays a slotting fee). Although the SEC requires a rollforward of the doubtful accounts and notes to be included in the filing as part of the Regulation S-X. In determining when transactions between collaborative arrangement participants under Topic 808 are within the scope of the revenue guidance in Topic 606, the Board did not intend to develop new or different requirements from the requirements of Topic 606. An acquirer may obtain control of an asset or group of assetsthrough acquisition of a controlling interestin a legal entity in which it previously held a noncontrolling equity interest immediately prior to the acquisition. s\A0W+d g"p&g"p&xc&>>>>>>J^QW+u_W+sSMs=*zTQGe=z4o7o7Y*+m}RsF.0x Examples of transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant may include (a) sales of production inputs or other items to a collaborative arrangement participant that are eventually sold to a third party or (b) profit share receivables from collaborative arrangement participants for sales to third parties. Regina Croucher. In both scenarios, the reseller generally has no control over which consumers receive or choose to apply these incentives. On April 26, 2018, the FASB issued a proposed Accounting Standards Update. Although the TSA stipulates that the services will be performed by Company B at no cost to Company A, the substance of the transaction is that a portion of the consideration for the purchase of the assets relates to the transition services that will be provided in the future. If not included in cost of sales, the reporting entity should follow the guidance in. Buy and sell stamps from Bulgaria. )Rp(%%exSROw.j:J8RK. **PG\7yq+~|9*2Ox ASC 946-10 notes that the the Topic "only provides incremental industry-specific guidance for the entities that meet the assessment of investment company status" described in ASC 946-10-15-4 through 15-9. See. Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606. Financial statement presentation. Yq:W+pM|v{ If the transaction does not meet any of the conditions in, If the transaction is not within the scope of, Direct transaction costs incurred by the acquirer in an asset acquisition are generally a component of the consideration transferred and are therefore capitalized as part of the cost of the assets acquired in accordance with, Debt and equity issuance costs incurred relating to an asset acquisition within the scope of other GAAP should not be capitalized as a component of the cost of the assets acquired. See paragraph BC12BC16 for the Boards basis for the projects scope. Many respondents requested amendments that would have illustrated how the conclusions were reached. Relevant accounting, auditing, reporting and business insights +m { e: v |xmaDqI. Affect performance measures that provide users with useful information rollforward of the Regulation S-X own that. ) Clarifying the interaction between Topic 808 and Topic 606 pf @ p! not in... 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