Accounting & Auditing

If you’re a calendar-year company, you’ve likely just filed or are about to file your Securities and Exchange Commission Form 10-K. Now, it’s almost the end of your first quarter. Are you on top of all the new accounting pronouncements effective as of this period?

Several Accounting Standards Updates (ASUs) issued in 2010 became effective during the first quarter of 2011 for calendar-year companies. Below is a list of some newly effective pronouncements that could affect you. This is not a comprehensive list, but it highlights some of the standards expected to be most significant to issuers.

ASU 2010-29, Business Combinations (Topic 805):  Disclosure of Supplementary Pro Forma Information for Business Combinations

• Effective for fiscal years beginning on or after December 15, 2010, and interim periods within those fiscal years
• Requires a public entity to disclose pro forma information for business combinations occurring in the current reporting period for revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations during the year had been as of the beginning of the annual reporting period, or as of the beginning of the comparable prior annual reporting period if comparative financial statements are presented
• Expands supplemental pro forma disclosures under Topic 805 to describe the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenue and earnings

ASU 2010-28, Intangibles—Goodwill and Other (Topic 350):  When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts

• Effective for fiscal years beginning after December 15, 2010, and interim periods within those fiscal years
• For reporting units with zero or negative carrying amounts in Step 1 of the goodwill impairment test, ASU 2010-28 requires an entity to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.
• An entity should consider whether there are any adverse qualitative factors indicating an impairment may exist consistent with the existing guidance and examples in paragraph 350-20-35-30, which requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

ASU 2010-20, Receivables (Topic 310):  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses

• For public entities, the disclosures as of the end of a reporting period were effective for interim and annual reporting periods ending on or after December 15, 2010. Disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010.
• Expands disclosures an entity provides about the credit quality of its financing receivables and the related allowance for credit losses, including to disaggregate certain existing disclosures by portfolio segment or class and provide certain new disclosures about an entity’s financing receivables and related allowance for credit losses
• In addition, an entity must disclose credit quality indicators, past due information and modifications of its financing receivables.

ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820):  Improving Disclosures about Fair Value Measurements

• Effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which become effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years

ASU 2009-14, Software (Topic 985):  Certain Revenue Arrangements That Include Software Elements

• Effective for all new revenue arrangements entered into, or arrangements materially modified, in fiscal years beginning after June 15, 2010
• Amends the scope of Accounting Standards Codification 985-605, Software:  Revenue Recognition, to exclude certain tangible products containing software that functions together with nonsoftware deliverables to deliver the tangible product’s essential functionality
• Clarifies that both nonsoftware components and software components are excluded from the scope of the software guidance, including undelivered elements that relate to software essential to the tangible product’s functionality

ASU 2009-13, Revenue Recognition (Topic 605):  Multiple-Deliverable Revenue Arrangements

• Effective for all new revenue arrangements entered into, or arrangements materially modified, in fiscal years beginning after June 15, 2010
• Addresses accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, including how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting.
• Significantly expands disclosures related to a vendor’s multiple-deliverable revenue arrangements

Again, this is not a complete listing of newly issued or effective standards. For a complete listing, go to the Financial Accounting Standards Board’s website and click on"Accounting Standards Updates" under the “Standards” tab. 

If you have questions related to these or other standards that may affect your company, contact your BKD advisor.