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ACCOUNTING UPDATEHFMA MAINE CHAPTER

March 10, 2016

Andrea J. Colfer, CPADavid Kennedy, CPA

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AGENDA

Revenue Recognition

Not-for-Profit Reporting Project

Financial Instruments

Leases

Reporting Discontinued Operations

Going Concern

What is next in the pipe line?

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ACCOUNTING STANDARDS UPDATE (ASU) NO. 2014-09

REVENUE FROM CONTRACTS WITH CUSTOMERS

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ISSUES IDENTIFIED BY THE AICPA HEALTH CARE TASK FORCE & STATUS

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ISSUES IDENTIFIED BY THE AICPA HEALTH CARE TASK FORCE & STATUS

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Contract? Performance Obligations?

Transaction Price? Allocation Recognition

STEPS FOR RECOGNIZING REVENUE

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DETERMINING TRANSACTION PRICE

Variable Consideration

Expected Value

Most Likely Amount

Constraining Estimates of Variable Consideration:“Include in the transaction price some or all of an amount of variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.” - FASB ASC 606-10

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IS THERE AN ENFORCEABLE CONTRACT?

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What is the point?

• Improve net asset classifications

• Provide information about:• Liquidity• Financial performance• Cash flows

THE NFP REPORTING PROJECT

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NET ASSET CLASSIFICATIONS:AND THEN THERE WERE TWO

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UNDERWATER ENDOWMENTS• Classify within net assets with donor restrictions rather

than the current unrestricted category

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Changes to better align with the Statement of Activities

CASH FLOWS

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THEN…..AND NOW

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WAS OPERATING,

NOW FINANCING__________

InterestCash

management

WAS INVESTING,

NOW OPERATING__________

Purchase of long-lived

assetsContributions restricted for

sameSales of long-lived assets

WAS OPERATING,

NOW INVESTING__________

Receipt of interest & dividends

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ENHANCED REPORTING OF EXPENSES

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• By nature and function

• Options• Statement• Footnote

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MEASURES OF OPERATING ACTIVITIES

Before internal transfers After internal transfers

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LIQUIDITY DISCLOSURES• Availability to meet short term needs

• Liabilities that require cash in the near term

• How liquidity is managed

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Financial Instruments ASU 2016-01

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Exempts entities from disclosure requirements under ASC 825 unless they are public business entities.

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• Transparent and economically neutral

• Better representation of rights and obligations

• Improves understanding of lessees financial commitments and comparability

Accounting For Leases – Project Completed February 25, 2016

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Accounting For Leases - Application

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Accounting For Leases - Transition• Modified retrospective transition includes optional practical

expedients• Effective December 15, 2018 for public companies• December 15, 2019

for all other organizations

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ASU 2014-08: DISCONTINUED OPERATIONS

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Applies to:a. A componentb. A group of componentsc. A businessd. A nonprofit activity

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ASC 205-20-45-1 – Discontinued Operations

1. The component “has been disposed of or is classified as held for sale.”

2. “The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction.”

3. “The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.”

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DISCONTINUED OPERATIONS- DISCLOSURES

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1. Facts and circumstances of discontinuation

2. Continued involvement, including quantitative disclosures

3. Major components of:1. Revenue & expenses2. Statement of cash flows

4. Major classes of assets and liabilities of held-for-sale operations

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PRESENTATION OF DISCONTINUED OPERATIONS

1. Present after income (or changes in net assets) from continuing operations in the statement of income (or operations)

2. If held for sale, present assets and liabilities separately in balance sheet

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ASU 2014-15 GOING CONCERN –Disclosure of Uncertainties about an Entity’s Ability to Continue as a

Going Concern

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Going Concern – New timeline

Balance Sheet Date

12/31/XX

Financial Statement

Date3/31/XX

Current auditingstandard12/31/X6

New auditingstandard3/31/X6

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Looking Ahead:

What’s In The Pipeline

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Questions?

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