On January 24, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update® (ASU) 2017-03, which amends certain SEC paragraphs to incorporate SEC staff announcements made at the September 22, 2016, and November 17, 2016, Emerging Issues Task Force meetings. The amendments affect FASB Accounting Standards Codification® (ASC) Topic 250, Accounting Changes and Error Corrections, and ASC Topic 323, Investments—Equity Method and Joint Ventures.

Key Provisions

SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of an Entity When Adopted

Staff Accounting Bulletin (SAB) Topic 11.M requires SEC registrants to evaluate the impact of accounting standards that haven’t yet been adopted and provide disclosure in both Management’s Discussion and Analysis and the notes to the financial statements about the potential material impact of accounting standards when adopted in the financial statements.

The SEC staff clarified its expectations regarding such disclosure, in light of the significance of the following accounting standards:

• ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
• ASU 2016-02, Leases (Topic 842)
• ASU 2016-03, Financial Instruments—Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments

If a registrant doesn’t know or can’t reasonably estimate the impact of adoption of the above standards, the SEC staff expects the registrant to make a statement to that effect. Consistent with SAB Topic 11.M, the SEC staff also expects the registrant to provide qualitative disclosures to help users assess the significance the adoption will have on the financial statements. The qualitative disclosure should include:

• A description of the effect of the accounting policies the registrant expects to apply, if determined
• A comparison to the registrant’s current accounting policies
• The status of the registrant’s process to implement the new standards
• Significant implementation matters yet to be addressed

ASC Topic 250 was amended to incorporate this SEC staff announcement.

SEC Staff Announcement: Accounting for Tax Benefits Resulting from Investments in Qualified Affordable Housing Projects

The amendments conform the SEC Staff Observer comment included in ASC 323-740-S99-2 to the guidance issued in ASU 2014-01, Investments—Equity Method and Join Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The primary effect of the amendment is to change the reference “effective yield method” to “proportional amortization method.”

Effective Dates and Transition 

The amendments are effective immediately.

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