NCIs may arise in an asset acquisition when the acquirer obtains a controlling financial interest, but less than 100%, of an entity that does not meet the definition of a business. FSP Corp enters into a supplier agreement with Toy Company to purchase board games to sell through its website. Most asset acquisitions involve exchanges of cash or other monetary assets for the assets acquired and thus determining the cost of the acquisition is straightforward. Handbooks | November 2022. The agenda request asked that the Board consider providing recognition and measurement guidance for nonrevenue transactions between collaborative arrangement participants. The Board did not address the accounting for transactions with a collaborative arrangement participant that are directly related to third-party sales of either collaborative arrangement participant. Like the depreciation or amortization of tangible long-lived assets, the amortization of intangibles may be included in operating expenses or cost of sales, depending on the use of the asset. BC29. IF!izskcc_*'$zW-kBo:N#*!_T=v)\ry tCSW1c*yJA.D2$q5_)}L ] XOX4& 0b:Pt(hEP2@h`0vSFa^&0AP$dFt0e ` a%r T2LXHmGsGHHPB H2XH"ECAc{0A_^! However, the Board continues to believe that the principles in Topic 606 might be appropriate to apply to a collaborative arrangement by analogy even if the counterparty is not considered a customer, provided there is no other more relevant authoritative guidance. However, the Board decided that aligning those models would require a broader, longer term effort that would extend beyond the issues raised in the agenda request. All rights reserved. Assuming the water bottles are initially held in inventory by FSP Corp prior to their eventual sale, the cost of the inventory would be reduced by $10,000 on a per unit basis such that cost of sales will be reduced when recognized in FSP Corps income statement. endstream endobj 1372 0 obj <>stream You can set the default content filter to expand search across territories. By explicitly providing unit-of-account guidance in the context of assessing the scope of the revenue guidance and aligning the unit-of-account guidance with Topic 606, the Board also sought to eliminate potential future diversity in determining units of account when assessing whether a collaborative arrangement is partially within the scope of Topic 606 or other Topics. Gains or losses of a similar nature that are not individually material shall be aggregated. Because the amendments in this Update correlate with Topic 606, an entity must have adopted Topic 606 to apply the amendments in this Update. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. Kompatybilno: Dla Fiat: Dla Fiat ABARTH Punto 1992012.03-Dla Fiat Doblo I Estate 119, 223 2001.03-2019Dla Fiat Doblo I Cargo 223 2001.03-2010Dla Fiat Fiorino III box/kombi 225 If the consideration given is nonfinancial assets or in substance nonfinancial assets within the scope of Subtopic 610-20 on gains and losses from the derecognition of nonfinancial assets, the assets acquired shall be treated as noncash consideration and any gain or loss shall be recognized in accordance with Subtopic 610-20. The Board also considered providing a nonrevenue accounting model because its decisions could result in more transactions that would need recognition and measurement guidance that does not exist in Topic 808. The issuance of Update 2014-09 on revenue from contracts with customers heightened the need for clarity on whether the guidance in Update 2014-09 applies to collaborative arrangements. 78uZE~*x!o]|)Q/@;,%4yM``1mnigKNfs8YfU_)lBLf&hLU XpSTS E>AC The Board considered whether a project scope limited only to arrangements conducted outside a legal entity could compound existing differences in accounting models for arrangements that may have similar characteristics but are conducted within a legal entity. The Board clarified that a contract that is not completed in the context of those expedients, as written in paragraph 808-10-65-2(e), refers to an arrangement for which all (or substantially all) of the revenue and expenses were recognized in accordance with guidance that was in effect before the date of initial application. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. +1 212-909-5455 Our comprehensive handbook provides detailed guidance and interpretations of ASC 805, with illustrative examples and Q&As. Consideration transferred should be allocated between the asset acquisition transaction and any separate transactions on a relative fair value basis. In other scenarios, the end customer may interact directly with the vendor to claim sales incentives for products purchased from a reseller (e.g., mail-in rebate). SG&A expenses include salaries of employees (excluding those related to product manufacturing or capitalized labor), depreciation (excluding those related to product manufacturing), bad debt expense, advertising expenses, rent expense (excluding those related to product manufacturing), and any other costs of selling product or administrating the business. Company A acquires the remaining 75% interest in the legal entity for $1.5 million in cash; there were no direct transaction costs incurred. The updated publication reflects ASU 2019-12, Simplifying the Accounting for Income Taxes. Company A acquires a group of assets that does not constitute a business for $100 million from Company B. The entity's future cash flows are expected to significantly change if either of the following criteria is met: a. If the consideration transferred is in the form of liabilities incurred or equity interests issued to the seller, these amounts should generally be recognized on the acquisition date. BC32. Our publication is intended to help entities better understand the relief, which is codified in ASC 848, and assist them in determining which . Welcome to the Deloitte Accounting Research Tool (DART)! For example, the depreciation of a manufacturers factory and production equipment would likely be considered fixed overhead and capitalized as part of inventory costs, while the depreciation of corporate headquarters would typically be considered part of general and administrative expense. The acquirer and the seller in an asset acquisition may enter into separate arrangements at or near the time of the asset acquisition. Revenue from Contracts with Customers (Topic 606), Company name must be at least two characters long. Insight. Nonmonetary transactions within the scope of ASC 845, Nonmonetary Transactions Lease contracts under ASC 840 Contributions of cash and other assets, including promises to give cash, that are either made by certain entities or received by not-for-profit entities within the scope of ASC 720-25, Other Expenses: endstream endobj startxref hb```[@(q$(^uJ=-m ::m@[-`x=@O'~=e'Nssssssss(:QAaPG+M6vJ+cW~7~7~7~7~7K*K|_zfKaTfJcaYTOS4 ]?wq]ZwW + Contingent consideration recognized should be included in the initial cost of the assets acquired. The carrying value of Company As investment is $100,000 and its fair value is $500,000. BC26. The Board chose not to expand the scope of the project to include arrangements structured within a legal entity (such as joint ventures). Instead, financing costs relating to the issuance of debt should be recognized as a reduction of the debt balance in accordance with. Subsequentchanges in the recorded amount of contingent consideration should generally be recognized as an adjustment to the cost basis of the acquired assets, by analogy to. The assessment ofwhether a good or service is distinct is a two-pronged test: the good or service must be both (1) capable of being distinct and (2) separately identifiable. The Board concluded that no additional recurring disclosures are necessary because of the projects limited scope and because the current disclosures in Topics 606 and 808 are robust. In addition, the amendments in this Update provide more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. In December 2017, the FASB hosted two workshops for preparers and auditors to provide feedback on the operability of the staffs potential nonrevenue model. h-$LSB@o,M!/EvKXSB>k86;A. %R&"(kXDe-ERBlQ5V`D!%|ekHd?iwQKjEN,DBJuK,*cn 9 POSTMASTER: Send address changes to Financial Accounting Series, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Please seewww.pwc.com/structurefor further details. Consideration received in exchange for a distinct good or service, Reimbursement of costs incurred by the reporting entity to sell the vendors products, Reimbursement of sales incentives offered by the vendor to end customers. PK ;bVoa, mimetypeapplication/epub+zipPK ;bV2[ META-INF/container.xmlM OAX LE7CJHHH o/t/;y 9:B- . Water Company provides FSP Corp with $10,000 to ensure that its products receive prominent placement on store shelves (that is, it pays a slotting fee). Buy more fro Such footnote disclosure may be desirable for items that affect the comparability of income statements between periods. Show All in One Page feature for viewing user-selected excerpts. Please see www.pwc.com/structure for further details. Some respondents requested that the Board clarify in what sequence the unit-of-account guidance should be applied. 4 0 obj Require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. BC2. Additionally, when a reporting entity acquires assets by issuing equity interests to the seller, the reporting entity can elect to apply the measurement guidance in ASC 805-50 or the guidance in ASC 718. If a portion of the consideration transferred is for the settlement of a preexisting relationship, the consideration transferred would be allocated to the asset acquisition and settlement of the litigation on a relative fair value basis, since the preexisting relationship is noncontractual. FSP Corp enters into a supplier agreement with Toy Company to purchase toys to sell through its website. Buy and sell stamps from Poland. Unusual nature means that the event possesses a high degree of abnormality and is clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the company. The following summarizes the Boards considerations in reaching the conclusions in this Update. Those entities are analogizing to those Topics either because the scope of the revenue guidance is not directly applicable or because the interaction between Topic 808 and those Topics is unclear. However, to address the concerns that the amendments in this Update potentially could lead to more transactions without recognition and measurement guidance in Topic 808, the Board decided to continue to permit an entity to apply the revenue guidance in Topic 606 by analogy or, if there is no appropriate analogy, as a policy election, without requiring the entity to apply all the guidance in Topic 606, as long as it presents the transaction separate from revenue recognized from contracts with customers. The Board decided to focus on targeted improvements to clarify when certain transactions between collaborative arrangement participants are within the scope of the revenue guidance in Topic 606. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued) and no other generally accepted accounting principles (GAAP) apply (for example, Topic 845 on nonmonetary transactions or Subtopic 610-20), measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. On the basis of that information, the Board decided that the nature of the joint operating activity and the shared risks and rewards should not preclude revenue recognition according to Topic 606 in those instances. Each member firm is a separate legal entity. The Board decided to permit an entity to early adopt the amendments in this Update, including adoption in any interim period, if the entity has already adopted or is concurrently adopting Topic 606. Each member firm is a separate legal entity. On the date of the acquisition, Company A should allocate the transaction price of $100 million between the acquired group of assets and the TSA with Company B on a relative fair value basis. An entity that under the provisions of this Subtopic accounts for its obligation under a research and development arrangement as a contract to perform research and development for others shall disclose both of the following: a. For example, a reporting entity that provides security monitoring services may have an acquired customer-relationship intangible asset. The comparability of Income statements between periods Boards considerations in reaching the conclusions in Update... The Accounting for Income Taxes presentation of revenue for certain transactions between arrangement. 100 million from Company B relative fair value basis enter into separate arrangements at or the. Time of the debt balance in accordance with filter to expand search across.. 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