{"id":538,"date":"2016-02-11T12:07:42","date_gmt":"2016-02-11T17:07:42","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=538"},"modified":"2016-02-11T12:07:42","modified_gmt":"2016-02-11T17:07:42","slug":"form-10-k-tune-up-tip-number-five-for-2016","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/form-10-k-tune-up-tip-number-five-for-2016\/","title":{"rendered":"Form 10-K Tune-Up Tip Number Five for 2016"},"content":{"rendered":"

The next topic from our 2016 Form 10-K Tune-up One-Hour Briefing is SAB 74 disclosures.<\/strong> You can listen to the briefing on-demand with CPE and CLE credit available at:<\/p>\n

www.pli.edu\/Content\/OnDemand\/Second_Annual_Form_10_K_Tune_Up\/_\/N-4nZ1z116ku?fromsearch=false&ID=278540<\/u><\/a><\/p>\n

 
\nTo begin, what does SAB 74, which is Topic 11-M in the SAB Codification, actually require? You can read the whole SAB at:<\/p>\n

www.sec.gov\/interps\/account\/sabcodet11.htm#M<\/u><\/a><\/p>\n

 
\nHere are a few highlights.<\/p>\n

First, it is clear that this disclosure is not required for all new Accounting Standards Updates<\/strong>:
\n\u201cThe Commission addressed a similar issue and concluded that registrants should discuss the potential effects of adoption of recently issued accounting standards in registration statements and reports filed with the Commission. The staff believes that this disclosure guidance applies to all accounting standards which have been issued but not yet adopted by the registrant unless the impact on its financial position and results of operations is not expected to be material.\u201d
\nThis part of the SAB dovetails very nicely with an important part of the SEC\u2019s Disclosure Effectiveness Initiative, which is to eliminate immaterial disclosures that potentially \u201cclutter up\u201d a report and potentially obscure material information.
\nHere are two examples to explore this issue.<\/p>\n

CocaCola did not mention recently issued accounting standards in their 2014 Form 10-K MD&A. They apparently made the judgment that there was no material impact in the current year from new accounting standards. They did include SAB 74 disclosures in their financial statements in note 1. You can check it out at:
\nwww.coca-colacompany.com\/content\/dam\/journey\/us\/en\/private\/fileassets\/pdf\/2015\/02\/2014-annual-report-on-form-10-k.pdf<\/u><\/a><\/p>\n

 
\nIntel treated this disclosure in exactly the same way, and you can find their 2014 10-K at:
\nwww.intc.com\/secfiling.cfm?filingID=50863-15-15<\/u><\/a><\/p>\n

 
\nSo, the first theme for SAB 74 is focus on material information<\/strong>.<\/p>\n

 <\/p>\n

 <\/p>\n

The second point<\/strong> to think about with this disclosure is what do we need to say about new standards that we believe will be material.<\/p>\n

The SAB contains four disclosure requirements:<\/p>\n

 
\n1. \u201cA brief description of the new standard, the date that adoption is required and the date that the registrant plans to adopt, if earlier.<\/p>\n

 
\n2. A discussion of the methods of adoption allowed by the standard and the method expected to be utilized by the registrant, if determined.<\/p>\n

 
\n3. A discussion of the impact that adoption of the standard is expected to have on the financial statements of the registrant, unless not known or reasonably estimable. In that case, a statement to that effect may be made.<\/p>\n

 
\n4. Disclosure of the potential impact of other significant matters that the registrant believes might result from the adoption of the standard (such as technical violations of debt covenant agreements, planned or intended changes in business practices, etc.) is encouraged.\u201d<\/p>\n

 <\/p>\n

 <\/p>\n

As you consider these disclosures, the first thing that arises is that over time there will be a progression in the detail of the disclosure<\/strong>.<\/p>\n

For example, most companies at this point in time will not know which method they will use to implement the new revenue recognition standard. But, as we go through next year, we will get closer to that decision. When the decision is made, the disclosure should be updated to inform investors about which method will be used. The same issue applies to quantifying the impact of a change.<\/p>\n

 
\nThe fourth disclosure, the potential impact on other significant matters, points out that when such a situation exists, this information may not be appropriate to disclose in the financial statements, but would be disclosed in MD&A.<\/p>\n

This means that this disclosure should not always be exactly the same in the financial statements and MD&A.<\/strong>
\nAs a brief PS, we have blogged about this topic before and suggested some wording for SAB 74 disclosures about the new revenue recognition standard. You can read that post at:
\nseciblog.pli.edu\/?p=171<\/u><\/a><\/p>\n

 <\/p>\n

As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":"

The next topic from our 2016 Form 10-K Tune-up One-Hour Briefing is SAB 74 disclosures. You can listen to the briefing on-demand with CPE and CLE credit available at: www.pli.edu\/Content\/OnDemand\/Second_Annual_Form_10_K_Tune_Up\/_\/N-4nZ1z116ku?fromsearch=false&ID=278540   To begin, what does SAB 74, which is Topic 11-M in the SAB Codification, actually require? You can read the whole SAB at: www.sec.gov\/interps\/account\/sabcodet11.htm#M … Continue reading Form 10-K Tune-Up Tip Number Five for 2016<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[116],"tags":[39,48,101,111,32,57,53,19,67,46,25,42,24,52,45,33,23,100,121,103,54,4,6,5,99,30,43,122],"coauthors":[163],"class_list":["post-538","post","type-post","status-publish","format-standard","hentry","category-10-k-tips","tag-accountant","tag-accounting","tag-aicpa","tag-am-law","tag-audit","tag-corporate-and-securities","tag-cpa","tag-fasb","tag-fasbiasb","tag-financial","tag-financial-accounting-standards-advisory-committee","tag-financial-reporting","tag-financial-statements","tag-form-10-k","tag-governance","tag-icfr","tag-mda","tag-pli","tag-pli-free-fridays","tag-pli-securities-regulation","tag-sab-74","tag-sec","tag-sec-professionals","tag-sec-reporting","tag-seci","tag-securities-law","tag-tax","tag-topic-11-m"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/538","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/comments?post=538"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/538\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=538"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}