Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Ryan Istre, an audit director and a member of the PKF Texas SEC team. Ryan, welcome back to the Playbook.

Ryan: Thanks, Jen. Appreciate it.

Jen: So, I’ve heard FASB is making some changes to share-based payment accounting. What do public companies need to know about this?

Ryan: Changes to the share-based payment accounting is happening pretty soon. A lot of companies will issue share-based payments to some of their employees, sometimes they’ll issue it to some of their consultants, and in the past, the accounting for those two may differ significantly.

Jen: It seems like that would be a little bit confusing to companies.

Ryan: It could be. The FASB issued this new standard to try to simplify the problem of divergent accounting. Now, one of the items, for example, that’s going to change with the new rules is that the point in time when you have to measure and the amount that you have to measure the compensation at, was different if it was a non-employee versus an employee. And historically it was at the commitment date, and now it’s going to be at the grant date of the actual share-based payment, so that’s going to bring the two in line and make it a little bit simpler for companies to apply.

Jen: Sounds good. Now when is this actually going to be effective?

Ryan: For most public companies, it’s going to be effective starting January 1, 2019, but an earlier option is permitted.

Jen: And what do they need to do to get ready for that?

Ryan: They just need to assess how much share-based payments they issue to non-employees and determine whether it benefits them to early adopt or to wait until the normal adoption date.

Jen: Perfect, sounds good. Well, we’ll get you back to talk about some public company information.

Ryan: Sure.

Jen: For more about this topic, visit PKFTexas.com/SECdesk. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

The Financial Accounting Standards Board (“FASB”) recently issued Accounting Standards Update (“ASU”) No. 2018-11 with targeted improvements to ASC Topic 842, Leases, to (1) add an optional transition method that would permit entities to apply the new requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption, and (2) provide a practical expedient for lessors regarding the separation of the lease and non-lease components of a contract.

Prior to the amendments in ASU No. 2018-11, the upcoming requirements in ASC 842 had to be initially applied using a modified retrospective transition method under which lessees were required to recognize lease assets and lease liabilities on the balance sheet for all leases and provide the new and enhanced disclosures for each comparative period presented. In response to constituents’ concerns about unanticipated costs and complexities, ASU No. 2018-11 now allows entities, upon initial adoption, to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under the new optional transition method, reporting for comparative periods presented must continue to follow the guidance under existing U.S. GAAP.

Continue Reading FASB Issues Targeted Improvements to New Lease Accounting Standard

The U.S. Securities and Exchange Commission (“SEC”) voted last week to adopt amendments to the “smaller reporting companies” (“SRCs”) definition to expand the number of companies that qualify for the scaled-down disclosure requirements. The Commission established the smaller reporting company category of companies in 2008 in an effort to provide general regulatory relief for smaller companies. SRCs may provide scaled disclosures under Regulation S-K and Regulation S-X.

The new smaller reporting company definition adopted last week enables a company with less than $250 million of public float to provide scaled disclosures, as compared to the $75 million threshold under the prior definition. The final rules also expand the definition to include companies with less than $100 million in annual revenues if they also have either no public float or a public float that is less than $700 million, which reflects a change from the revenue test in the prior definition that allowed companies to provide scaled disclosure only if they had no public float and less than $50 million in annual revenues. Continue Reading The SEC Expands the Scope of Smaller Reporting Companies that Qualify for Scaled Disclosures

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s host, and I’m here today with Ryan Istre, an Audit Director and a member of the PKF Texas SEC team. Welcome to the Playbook Ryan.

Ryan: Thanks Jen, glad to be here.

Jen: So Ryan what are the hot topics that the SEC staff are looking into these days?

Ryan: That’s a good question Jen. So there are a lot of new accounting pronouncements that are coming up in the very near future but one of the hot topics that the SEC staff are looking into right now are non GAAP financial measures. Some of the items that have come out in recent comment letters relate to the prominence of which non GAAP measures are being displayed over GAAP measures, which we all know is a no-no per Regulation G.
Continue Reading Hot Topics from the SEC

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m here today with Ryan Istre, an audit director and a member of the PKF Texas SEC team.  Ryan, welcome back to the Playbook.

Ryan:  Thanks for having me here Jen.

Jen:  So I know there’s new revenue recognition rules coming, what are the SEC’s views on this for registrants?

Ryan:  That’s a very good question Jen.  The new revenue recognition rules – or ASC 606 – are going to be effective for most registrants beginning January 1st of 2018.

Jen:  So this year?

Ryan:  This year, that’s correct.  What this is intended to do is bring into congruence the SEC’s rules with the new revenue recognition standards.  Some of the topics that are being discussed are the potentially outdated Regulation SX rules.  Other topics which may be of a little more importance are the effect of what happens with retrospective application of these new pronouncements when there are predecessor financial statements followed alongside successive financial statements.
Continue Reading What to Know About the SEC’s Revenue Recognition Rules

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s host, and I’m here with Chip Schweiger, and audit director and a member of the PKF Texas SEC team. Chip welcome back to the Playbook.

Chip: Thanks Jen, good to be here.

Jen: So President Trump signed into law the Tax Act on December 21, 21017, it’s got a lot in it; what do SEC companies need to know that’s going to affect them?
Continue Reading What to Know About Staff Accounting Bulletin (SAB) 118

Last week, the Financial Accounting Standards Board (FASB) issued a GAAP alternative which allows private companies to elect not to consolidate variable interest entities (VIEs) in common control leasing agreements.

Who is affected by this update?

This applies to all entities other than a public business entity, a not-for-profit entity, or an employee benefit plan within the scope of topics 960-965 on plan accounting.

Why is this important?

The new guidance allows a private company to elect—when certain conditions exist—not to apply VIE guidance to a lessor under common control. Instead, the private company would make certain disclosures about the lessor and the leasing arrangement.

According to FASB, “This will improve financial reporting for users of private company financial statements, while reducing the cost and complexity associate with applying VIE guidance to leasing arrangements under common control. The alternative is intended to help lenders and other users better align the information used in assessing the financial information using financial statements.”

Where can I learn more?

The ruling is on the FASB website.  They also have a brief video from Larry Smith and Larry Weinstock, FASB and Private Company Council board members, explaining the update.

PKF Texas can help you interpret if and how it is applicable to your business.