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Posted by Paul Languirand on Tue, Mar 14, 2017 @ 07:04 AM

ASUMany recent accounting standards updates (ASUs) have been written to simplify or clarify U.S. generally accepted accounting principles (GAAP) and have permitted early adoption. Early adopting some of these ASUs could streamline processes for the closing of year end and preparation of financial statements.

Our publication, Accounting Updates that Impact 2016 Financial Reporting, contains information about standards that are required to be adopted for year-end December 31, 2016 financial statements of both public and private companies.

Public and Private Companies

Both public business entities and non-public business entities (private companies) have the ability to early adopt several standards that may simplify the accounting and financial statement preparation at the December 31, 2016 year-end. Consider the following:

  • Income taxes: ASU 2015-17Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes simplifies the presentation of deferred income taxes by having entities present all deferred income taxes as non-current instead of separating them into current and non-current portions. Entities with net operating loss carryforwards (NOLs) in particular may benefit from early adoption by eliminating the need to schedule out the use of their NOLs to determine a current and non-current portion. 

    A second change to the accounting for income taxes, ASU 2016-16 Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, simplifies the accounting for the tax impact of intra-entity transfers by requiring the tax impact to be accounted for at the time of the transfer rather than being deferred, simplifying, in some ways, the preparation of income tax provisions and deferred income taxes. 
  • Inventory measurement: ASU 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory requires an entity with inventory to measure that inventory based on the lower of cost or net realizable value instead of lower of cost or market (LCM). Net realizable value is one of three components that is used to determine market, thus adoption of this ASU may simplify the measurement of write-downs of inventory. The change to the lower of cost or net realizable value does not apply to entities that measure their inventory using the last-in-first-out (LIFO) or retail methods. 
  • Stock based compensation: ASU 2016-09 Compensation —Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting simplified several elements of share-based accounting. Areas streamlined upon adoption of the new standard include the accounting for income taxes upon settlement of the award and the introduction of additional private company practical expedients related to the estimation of the expected term and the expected life of an award.
  • Statement of cash flows: Two recent standards address questions that have arisen in the reporting of cash flows. ASU 2016-15Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments addresses the proper classification of several items within the cash flow statement, including debt prepayment and extinguishment, zero coupon debt, contingent consideration in a business combination, proceeds from insurance, distributions from equity method investments, beneficial interests in securitization transactions and the predominance principle. ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash clarifies how restricted cash should be presented in the cash flow statements. Entities that are grappling with the presentation of these items for the first time in their upcoming financial statements may consider adopting these standards to simplify the decision-making process on the presentation of the cash flows statement.

Other standards that may be early adopted for 2016 year-end financial statements by public and private companies include:

Additional ASUs Private Companies May Consider for Early Adoption

Some ASUs already required to be adopted by public companies are not yet effective for private companies, but may be early adopted. The following two ASUs could simplify the accounting and reporting by private companies in the right circumstance:

Other standards that are available for early adoption only to private companies include:

  • ASU 2014-10 Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation
  • ASU 2014-13 Consolidation (Topic 810):Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (12-G)
  • ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis
  • ASU 2015-07 Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)
  • ASU 2015-09 Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts

Assessing the Impact

Working closely with a professional who is experienced with implementing complex accounting standards may be able to help your organization determine the impact of early adoption and whether the investment in revising current reporting processes makes sense for your organization. For more information about how these and other accounting standards will affect you, please contact us here



Paul Languirand is a Shareholder in the Accounting & Auditing Group. He can be reached at 401.626.3212 and



© Copyright 2017 CBIZ Tofias and MHM. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ Tofias is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ Tofias assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

Tags: ASU, Paul Languirand, accounting standards

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