Quarterly Outlook June 2017

Quarterly
Outlook
June 2017
US GAAP
kpmg.com/us/frv
Quarterly Outlook
June 2017
The effective date of the new revenue recognition standard for public
companies quickly approaches. Implementation efforts by companies are in
high gear and stakeholders and regulators are keeping a watchful eye on
their progress.
The SEC continues to stress the importance of updating and maintaining
internal controls related to implementing the new standards on revenue
recognition, lease accounting and credit impairment; robust transition
disclosures; and considering whether transition to a new standard results in
new risks, including fraud risks.
While the FASB continues its work on new standard-setting projects, its
short-term agenda is focused on more narrowly-scoped projects geared
toward simplifying or clarifying current accounting guidance.
Our Quarterly Outlook summarizes these and other accounting and financial
reporting developments potentially affecting you in the current period or
near term.
2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member
firm of the KPMG network of independent member firms affiliated with KPMG Quarterly Outlook June 2017
International Cooperative (KPMG International), a Swiss entity. NDPPS 671801
Contents
Current quarter financial reporting matters ................................................... 1
SEC under new leadership .......................................................................... 1
SEC staff comments ................................................................................... 1
SEC rulemaking developments ................................................................... 2
Income tax implications of Brexit ................................................................ 4
New standards and guidance ........................................................................... 5
Revenue recognition effective date draws near .......................................... 5
Implementing the new lease accounting standard ..................................... 6
Moving forward on financial instruments .................................................... 8
Identifying the customer in a service concession arrangement .................. 9
Modification accounting in share-based payment awards........................... 9
Shortened premium amortization period for certain callable debt
securities ................................................................................................... 10
Separate presentation for service cost component of net benefit cost .... 11
Effective date clarification for new goodwill impairment standard............ 11
PCAOB adopts new standard to enhance the auditors report; issues two
proposals ................................................................................................... 12
Projects and agenda priorities ....................................................................... 14
Potential changes to consolidation guidance, including optional private
company exemption .................................................................................. 14
FASB proposes improvements to accounting for insurance contracts ..... 14
EITF to address costs incurred in certain cloud computing arrangements 15
Recommended reading and CPE opportunities ........................................... 16
The revenue recognition quandary ............................................................ 16
Staying ahead in a volatile tax landscape .................................................. 16
Federal tax reform could have big effect on states ................................... 16
Upcoming CPE opportunities .................................................................... 16
Appendix Accounting standards effective dates ....................................... 18
Accounting standards affecting public companies in 2017 ....................... 18
Accounting standards affecting public companies in 2018 and beyond .... 19
Accounting standards affecting private companies in 2017 ...................... 21
Accounting standards affecting private companies in 2018 and beyond .. 22
firm of the KPMG network of independent member firms affiliated with KPMG Quarterly Outlook June 2017
Current quarter financial
1 reporting matters
SEC under new leadership
On May 4, Jay Clayton was sworn into office as the 32nd Chairman of the SEC.
Since taking office, Clayton has filled numerous key roles at the SEC. Among
the appointments, the SEC named William Hinman as the new Director of the
SECs Division of Corporation Finance on May 9.
SEC staff comments

The SEC staff is focused on internal control over financial reporting (ICOFR) and
transition disclosures, particularly as they relate to implementing the new
revenue recognition, lease accounting and credit impairment standards.
Internal control over financial reporting
The SEC staff continues to comment on internal control over financial reporting
(ICOFR). Through March 16, SEC staff comments posted to EDGAR about
administrative deficiencies included:
not disclosing which framework the company used;
use of an incorrect assessment date;
missing reports and disclosures;
nonconforming certifications or definitions by management included in
Form 10-K, Item 9a, and Form 10-Q, Item 4;
disclosures about changes in internal controls addressing the year-to-date
period instead of the required quarterly period;
not excluding the acquired business from the auditors report when
management excluded it from its assessment of the effectiveness of
ICOFR; and
not concluding on the effectiveness of ICOFR when a control deficiency
was identified.
Other recurring SEC staff comments about ICOFR focus on:

material changes to ICOFR e.g. not disclosing changes in IT systems,
business operations and unusual transactions.
immaterial error corrections i.e. whether management has assessed
and disclosed the effectiveness of ICOFR in the current and prior period
when it reports an immaterial correction of a prior period.
description of control failures e.g. insufficient detail about (1) the nature
of the material weakness and its effect on financial reporting and internal
control and (2) managements remediation plans.
2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member Home
firm of the KPMG network of independent member firms affiliated with KPMG Quarterly Outlook June 2017 | 1
Current quarter financial reporting matters
inconsistent conclusions e.g. concluding that disclosure controls and

procedures were ineffective but ICOFR was effective.
disclosures about remediation i.e. inadequate disclosure about the
remediation status of a previously identified material weakness.
Transition disclosures about new accounting standards
At the September 2016 EITF meeting, the SEC staff announced that when a
registrant does not know and cannot reasonably estimate the effects of
adopting a new accounting standard, it should consider additional qualitative
financial statement disclosures to help users understand the potential
significance of those effects.
The SEC staff expects a registrant to describe the new accounting policies that
it expects to apply, if determined, and compare those policies with current
accounting policies. In addition, a registrant should describe progress made
toward implementing the new standard and the significant implementation
matters that still must be addressed.
A registrant should avoid boilerplate transition disclosures, and strive to provide
useful information about its adoption and implementation efforts, particularly
those addressing the new revenue recognition, lease accounting and credit loss
standards.
See Revenue effective date draws near for a discussion of recent SEC staff
speeches highlighting its focus on revenue recognition implementation,
including transition disclosures.
Other SEC staff focus areas
The SEC staff also frequently comments about:
non-GAAP financial measures;
Managements Discussion and Analysis;
fair value measurements;
income taxes;
intangible assets and goodwill;
revenue recognition;
segment reporting;
acquisitions and business combinations;
debt/equity; and
commitments and contingencies.
SEC rulemaking developments

Exhibit hyperlinks and HTML format
The SEC adopted amendments that require registrants that file registration
statements and reports subject to the exhibit requirements under Item 601 of
Regulation S-K, or that file Forms F-10 or 20-F, to include a hyperlink to each
exhibit listed in the exhibit index of these filings. Those registrants also are
required to submit these filings in an HTML format beginning with filings
submitted on or after September 1, 2017. Certain other registrants will need to
comply one year later.
Resources: Final rule
Initiative to modernize Guide 3

The SEC is requesting feedback about whether the disclosure requirements
under Industry Guide 3, which generally apply to bank holding companies,
continue to elicit the information that investors need to make informed
investment and voting decisions.
The comment period ends July 7.
Resources: Request for comment
Relief on conflict minerals
The staff of the SECs Division of Corporation Finance updated its statement
about the effect of the decision by the Court of Appeals on the Conflict
Minerals Rule. The staff decided not to recommend enforcement action if a
company performs only a reasonable country-of-origin inquiry and files Form
SD, even if it would otherwise be required under the rule to conduct detailed
supply-chain due diligence, prepare and file a conflict minerals report, or
undergo an audit.
Resources: SEC statement
Rule amendments under JOBS Act
The SEC adjusted for inflation certain thresholds for amounts raised through
crowdfunding, and for eligibility as an emerging growth company (EGC) under
the Jumpstart Our Business Startups (JOBS) Act. It also adopted technical
amendments including those related to scaled disclosure requirements for
EGCs.
Resources: Press release; Final rule
Shortened settlement for securities transactions
The SEC adopted a rule amendment to shorten by one business day the
standard settlement cycle for most broker-dealer securities transactions to two
business days (T+2) from three business days (T+3). Broker-dealers will be
required to comply with the amended rule beginning September 5, 2017.
Resources: Final rule
XBRL-related actions
The SEC announced actions aimed at improving the accessibility and quality of
data submitted by public companies and mutual funds using eXtensible
Business Reporting Language (XBRL).
IFRS taxonomy for foreign private issuers
The SEC published on its website an IFRS-based XBRL taxonomy to enable
foreign private issuers that prepare their financial statements under IFRS to
submit them in XBRL.
Inline XBRL rule proposal
The proposed rule would require all public companies and mutual funds to
embed XBRL into their financial statements and risks/returns summaries,
respectively. Currently, the XBRL information is included in a separate file. The
proposal would not change the scope of the information that public companies
and mutual funds provide in XBRL, but would eliminate the 15 business day
filing period for mutual fund filings that contain risks/returns summaries. This
change accelerates a mutual funds filings of XBRL information.
The public company and mutual fund requirements would be phased in over
three and two years, respectively. The filers size would determine when
compliance is first required. Additionally, the proposal does not address the
auditors role, if any, related to Inline XBRL. Currently, independent auditors are
not responsible for XBRL-formatted exhibits under SEC requirements.
In 2016, the SEC initiated the voluntary Inline XBRL program, which extends
through March 30, 2020.
Resources: KPMGs web article, SEC takes XBRL-related actions
C&DIs about Regulation A
The staff of the SECs Division of Corporation Finance updated its Compliance
and Disclosure Interpretations (C&DIs) about filing requirements under
Regulation A, which permits an issuer to offer and sell small amounts of
securities in a 12-month period without complying with the Securities Act of
1933 or the Securities Exchange Act of 1934.
Resources: C&DIs
Income tax implications of Brexit

On March 29, 2017, the UK formally notified the European Council of their
intention to withdraw from the European Union (EU). The notice initiated a two-
year negotiation period to establish the withdrawal terms. If no agreement is
reached after two years, the UKs separation becomes effective, unless the
remaining EU members unanimously agree to an extension.
While withdrawal presently seems inevitable at the earlier of the withdrawal
agreement or two years, all relevant tax laws and treaties remain unchanged
and the ultimate tax consequences are unknown. Companies reporting under
US GAAP should wait to recognize in their financial statements estimated
changes in their income tax accounts until (1) the UK and the EU (or individual
member countries) enact changes in tax laws or (2) withdrawal takes place.
Meanwhile, public and private companies with UK operations should provide
clear and transparent disclosures about the withdrawal process and their
potential effects, including the:
UKs notice of withdrawal and the nature of the companys activities that
could be affected;
uncertainty in evaluating the effect on financial statements of the loss of
tax exceptions and reliefs available to EU members only; and
expected changes in tax laws or regulations for which there may be a
financial statement effect.
Companies should monitor developments and reassess at each reporting date
whether uncertainties about the UKs future tax status have changed, which
would require additional disclosure, or have been resolved, which would require
changes to current or deferred taxes.
Resources: KPMGs Defining Issues, Income tax implications of Brexit
New standards
2 and guidance
Revenue recognition effective date draws near
As the 2018 effective date of the new revenue recognition standard for public
companies quickly approaches, companies are focused on their implementation
efforts. Revenue recognition implementation also is a key focus area of the SEC
staff, and has been frequently addressed in recent speeches.
Recurring SEC consultation themes
In a recent speech, an SEC staff member from the Office of the Chief
Accountant (OCA) shared observations from consultations with registrants
about implementing the new standard. The observations included these
common themes.
Identifying the contract. Determining the contract with the customer is a
critical step that requires evaluating enforceable rights and obligations. An
analysis of contractual provisions such as termination clauses and
repurchase rights could affect the accounting conclusions related to a
contract. Registrants should carefully assess the specific facts and
circumstances of each transaction, including all relevant contractual terms,
and exercise reasonable judgment when identifying and evaluating each
contract with its customers.
Identifying performance obligations.
Companies should not presume that the concept of a deliverable
under current guidance is the same as the concept of a performance
obligation under the new standard. Although conclusions about the
unit of account may not change in many instances, a company must
evaluate the contractual terms of its contracts with customers under
the new standard to reach those conclusions.
A company must apply reasonable judgment and support its
identification of performance obligations using the core principles of the
standard, including whether the promised goods and services are
inputs to a combined output.
Preparers must understand each underlying transaction, including their
specific facts and circumstances and contractual terms, and faithfully
apply the principles of the new standard to those specific facts and
circumstances.
SEC staff from the OCA has stated that based on preliminary reviews of recent
10-K and 10-Q filings, it is encouraged by the number of companies that have
enhanced their SAB 74 transition disclosures. However, some companies
indicated they do not expect the effect of the new revenue recognition
standard to be material. The SEC staff would expect that even if a registrant
anticipates little change to its balance sheet or income statement, the changes
to the related disclosures may be material. In assessing whether adoption is
New standards and guidance
expected to materially affect their business, registrants should consider

possible changes to recognition, measurement, presentation and disclosure.
The SEC staff also expects SAB 74 disclosures about the effect of the new
standard to evolve and include significantly more detail over time as
implementation progresses. See Transition disclosures about new accounting
standards.
New disclosure requirements
The SECs Chief Accountant recently reminded companies that the new
revenue recognition standard introduces a number of significant new disclosure
requirements that may present implementation challenges. Companies should
dedicate appropriate time and resources to (1) gather the necessary data and
(2) implement the appropriate systems, processes and controls to comply with
the new disclosure requirements. The SEC staff is urging companies to take
these steps before the end of the year.
Internal control over financial reporting
The SEC staff also has stressed that transition to a new standard requires
management to carefully consider whether its application results in new risks or
changes to previously identified risks, including fraud risks. The new revenue
recognition standard introduces new estimates and judgments that are
susceptible to management bias, including identifying performance obligations,
estimating stand-alone selling prices for distinct goods and services, and
estimating variable consideration when determining transaction price.
Management should consider whether new or modified internal controls over
financial reporting (ICOFR) are needed to mitigate the newly identified risks,
including management bias.
Companies also likely will need to update their internal controls over measuring
the transition adjustments and preparing the expanded disclosures. Companies
should disclose those changes that have materially affected, or are reasonably
likely to materially affect, their ICOFR as the underlying business changes.
Registrants should not wait until the effective date of the new standard to
disclose related changes in ICOFR.
Resources: KPMGs Handbook: Revenue Recognition; Q&A, Revenue
Recognition for Software and SaaS, and webpage on revenue; Speeches from
the SECs Chief Accountant and OCA
Implementing the new lease accounting standard

By now, most companies understand that the new lease accounting standard
will require lessees to recognize all leases (except for short-term leases) on the
balance sheet. However, in addition to the significant effort many companies
will make to identify and abstract their leases, companies should take stock of
other provisions in the new standard that will likely significantly affect their
implementation efforts and subsequent accounting.
Reassessment events and new system requirements for lessees
Current US GAAP does not require lessees to reassess the lease term or
lessee purchase options after lease inception unless the lease is modified.
However, the new standard requires a lessee to update its judgments about
the lease term and lessee purchase options when significant events or changes
in circumstances within the control of the lessee - i.e. triggering events -
occur. The new standard provides examples of triggering events that include
constructing significant leasehold improvements or entering into a sublease. In
addition to reassessing the lease term and lessee purchase options when a
triggering event occurs, lessees will need to remeasure a lease whenever the
market value of an underlying asset subject to a residual value guarantee
substantively changes or a contractual payment contingency is resolved.
To facilitate periodic reassessments, companies will need to implement new
systems and/or processes to monitor for possible triggering events, market
value changes in leased assets subject to residual value guarantees, and
contingencies that affect the lease payments. Companies also will need to
update their controls to address new risk points introduced by the
reassessment requirements. This effort likely will require cross-functional
coordination and sufficient lead time to design and implement new systems,
processes, and controls before adopting the new standard.
Foreign currency matters for operating leases
Lessees are evaluating the exchange rate(s) they should use to measure the
single lease cost for an operating lease denominated in a foreign currency.
Although the new standard describes operating lease cost as a single lease
cost, it effectively comprises two components (1) amortization of the right-of-
use (ROU) asset and (2) accretion of the lease liability. Under US GAAP about
foreign currency matters, companies should use:
the historical exchange rate to measure the portion of lease cost associated
with the amortization of the ROU asset (a nonmonetary amount); and
the average exchange rate for the period (assuming no major fluctuations in
exchange rate during the period) to measure the portion of lease cost
associated with the accretion of the lease liability (a monetary amount).
This represents a change from current US GAAP, where companies measure
the entire operating lease expense generally using an average exchange rate
for the period. P&L volatility may result from remeasuring the balance of the
lease liability using current exchange rates. Companies may need to update
their systems to accommodate these calculations.
Build-to-suit transition guidance
The new standard will result in many lessees derecognizing legacy build-to-suit
assets and liabilities in transition, resulting in changes to certain historical
balance sheet metrics and ratios.
This is a welcome change for affected lessees because many build-to-suit
assets and liabilities are significant and have remained on lessee balance sheets
for many years solely due to the stringent real estate sale-leaseback
requirements. The build-to-suit transition guidance is driving some companies
to early adopt the new leases standard.
Other implementation considerations
On a broader scale, companies should continue to prepare for timely
implementation by:
evaluating the benefits of early adoption;
creating an inventory of all leases;

determining whether to elect the transition practical expedients;
evaluating incremental systems and process requirements (e.g. to prepare
the required disclosures); and
evaluating the adequacy of transition disclosures (see Transition disclosures
for new accounting standards).
The new lease accounting standard is effective for public companies in fiscal
years beginning after December 15, 2018 (i.e. 2019 for calendar year-end public
companies), and one year later for all other entities.
Resources: KPMGs Issues In-Depth, Build-to-suit leases, and related webpage
on leases
Moving forward on financial instruments

The FASBs new financial instruments standards that address (1) recognition
and measurement and (2) credit impairment are effective for public business
entities with calendar year-ends in 2018 and 2020, respectively. Companies
should promptly begin to analyze the practical business implications of adopting
these standards, and consider the adequacy of their disclosures about the
expected effects of adopting the standards.
Companies that invest in equity securities should begin analyzing their
portfolios to understand the potential effects of the recognition and
measurement standard. Those companies will need to measure equity
investments with readily determinable fair values at fair value and recognize
changes in fair value in net income. Under current US GAAP, companies
recognize changes in fair value of available-for-sale equity securities in other
comprehensive income (OCI). Additionally, the standard introduces a new
measurement alternative and US GAAP concept cost basis adjusted for
observable transaction prices for equity securities without a readily
determinable fair value. To date, this measurement alternative has been the
source of the greatest number of interpretive questions about the new
standard. It also will likely require the most significant changes to processes
and controls.
The FASBs overhaul of credit impairment accounting will significantly affect
financial institutions, banks and other companies that originate or invest in
financial assets such as loans, receivables and debt securities measured at
amortized cost. The new current expected credit loss model will require
companies to recognize an estimate of credit losses expected to occur over the
remaining life of the financial assets. Companies may need to collect more
data, and significantly change their systems, processes and internal controls to
comply with the requirements of the new standard.
The FASB formed a Transition Resource Group (TRG) to discuss potential
issues arising from the implementation of the credit impairment standard.
Public companies should ensure that they adequately disclose the expected
effects of implementing these standards. See Transition disclosures about new
accounting standards.
Hedge accounting
The FASBs 2016 proposed improvements to hedge accounting would provide
additional opportunities for companies to align their hedge accounting with their
risk management activities, and potentially reduce the cost and effort required
to apply hedge accounting. The FASB expects to issue a final standard in
August 2017.
Resources: KPMGs webpage on financial instruments
Identifying the customer in a service concession arrangement

On May 16, the FASB issued a new standard clarifying that the customer in a
service concession arrangement1 is always the grantor (e.g. the government or
public sector entity that owns public infrastructure such as a toll road). Third-
party users (e.g. drivers using a toll road) are not customers. The identity of the
customer affects revenue recognition and other aspects of the accounting for
these arrangements.
The standard is effective concurrent with the new revenue recognition
standard. However, the transition guidance depends on whether a company
adopted the new revenue recognition standard before the issuance date of this
standard.
Resources: KPMGs web article, Identifying the customer in a service
concession arrangement; ASU 2017-10
1
Service concession arrangements are arrangements between a grantor and an operator
that operates and maintains a grantors infrastructure (e.g. airports, roads, bridges,
tunnels, prisons and hospitals) for a specified time. The operator may be required to
construct or provide periodic capital-intensive maintenance (major maintenance) of the
infrastructure. In exchange for these services, the operator may be given the right to
charge the public (third-party) users for using the infrastructure.
Modification accounting in share-based payment awards

The FASB recently issued guidance that clarifies when changes to the terms or
conditions of a share-based payment award must be accounted for as a
modification.2 Specifically, companies will apply modification accounting unless
the fair value, vesting conditions and classification of the modified award are
the same before and after the modification. However, companies will continue
to apply modification accounting to changes in awards made in response to (1)
laws or regulations or (2) the new revenue recognition, lease accounting or
credit impairment standards.
Companies should continue to disclose significant changes in the terms and
conditions of a share-based payment award and assess the tax consequences
even if the changes do not result in modification accounting.
2
Modification accounting is the accounting for the changes in terms or conditions of a share-
based payment award.
The guidance is effective for all entities in annual and interim periods in fiscal
years beginning after December 15, 2017. Early adoption is permitted, including
adoption in an interim period for which financial statements have not been
issued or made available for issuance.
Resources: KPMGs web article, FASB clarifies scope for share-based payment
modifications and related podcast; ASU 2017-09
Shortened premium amortization period for certain callable

debt securities
A new FASB standard shortens the premium amortization period for purchased
non-contingently callable debt securities. Specifically, the premium amortization
period will end at the earliest call date, rather than the contractual maturity date.
Shortening the amortization period is generally expected to more closely align
interest income recognition with the expectations incorporated in the market
pricing on the underlying securities. The shorter amortization period means that
interest income would generally be lower in the periods before the earliest call
date and higher thereafter (if the security is not called) compared with current
US GAAP. Because the premium will be amortized to the earliest call date, the
holder will not recognize a loss in earnings for the unamortized premium if the
call is exercised.
The standard applies to companies (including investment companies) that hold
certain non-contingently callable debt securities in which the amortized cost
basis is higher than the amount repayable by the issuer at the earliest call date.
Investment companies need not apply the other aspects of the guidance on
nonrefundable fees and costs.
The standard does not change the discount amortization for purchased debt
securities. The discount continues to be amortized to the contractual maturity
date.
Effective dates and early adoption provisions
Public business
All other entities
entities
Annual periods In fiscal

December 15, 2019
years beginning after
December 15, 2018
Interim periods In fiscal
December 15, 2020
Early adoption allowed? Yes, including adoption in an interim period.
Resources: KPMGs Defining Issues, FASB changes premium amortization

period for certain callable debt securities, and related podcast; ASU 2017-08
Separate presentation for service cost component of net

benefit cost
The FASB issued a new standard requiring companies to present the service
cost component separately from the other components of net benefit cost.
Specifically, a company will present service cost in the income statement line
items in which it reports its compensation cost. All other components of net
benefit cost will be reported in the income statement separate from the service
cost component and outside of operating income, if that subtotal is presented.
The standard does not prescribe the income statement geography for the other
components of net benefit cost when a company does not present an
operating income subtotal, but those other components must be presented
separately from the service cost component. These changes may significantly
affect gross profit, operating income and profit margin for some companies.
Additionally, the service cost component will be the only component that can
be capitalized. Thus, a company that capitalizes retirement benefit costs may
need to change the way it determines the amount to be capitalized.
Effective dates and early adoption provisions
Public business
All other entities
entities
Annual periods In fiscal

December 15, 2018
December 15, 2017
Interim periods In fiscal
December 15, 2019
Early adoption allowed? Yes, at the beginning of an annual period for which
financial statements (interim or annual) have not
been issued or made available for issuance.
Resources: KPMGs Defining Issues, FASB separates service cost component

from other pension cost components, and related podcast; ASU 2017-07
Effective date clarification for new goodwill impairment

standard
The FASB staff recently clarified certain aspects of the effective date for the
new accounting standard that simplifies the goodwill impairment test.
Specifically, all companies may early adopt the standard for goodwill
impairment tests with measurement dates on or after January 1, 2017.
However, companies need to apply the same impairment model consistently to
all goodwill impairment tests performed within a fiscal year, except for interim
tests performed as of a date before January 2017.
For example, a company with a fiscal year ending September 30, 2017
performed a two-step interim impairment test as of November 30, 2016. The
company may early adopt the simplified goodwill impairment test if it performs
its annual impairment test on or after January 1, 2017. If the company
performed a two-step interim impairment test as of February 1, 2017, it would
be prohibited from early adopting the simplified impairment test for its annual
goodwill impairment test.
KPMGs web article includes examples that illustrate how a company should
apply the effective date guidance.
Resources: KPMGs Defining Issues, FASB simplifies goodwill impairment test,
and related podcast; ASU 2017-04
PCAOB adopts new standard to enhance the auditors report;

issues two proposals
The PCAOB recently adopted a final standard that, subject to SEC approval, will
require the auditor to include in the auditors report a discussion of critical audit
matters (CAMs). The standard defines CAMs as matters that have been
communicated to the audit committee; are related to accounts or disclosures
that are material to the financial statements; and involve especially challenging,
subjective or complex auditor judgment. Other changes to the auditors report
will include:
disclosing auditor tenure (i.e. the year in which the auditor began
consecutive service as the companys auditor);
adding the phrase whether due to error or fraud in describing the auditors
responsibility under PCAOB standards to plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free from material misstatement;
adding a statement that the auditor is required to be independent; and
reorganizing the paragraphs so that the opinion paragraph will be the first
paragraph of the auditors report.
The requirement to communicate about CAMs will be effective for:
large accelerated filers, for audits of fiscal years ending on or after June
30, 2019; and
all other companies, for audits of fiscal years ending on or after December
15, 2020.
All other requirements are effective for audits of fiscal years ending on or after
December 15, 2017.
The new requirements apply to audits conducted under PCAOB standards.

Communicating about CAMs is not required for audits of emerging growth
companies; brokers and dealers; investment companies other than business
development companies; and employee stock purchase, savings and similar
plans.
The PCAOB also recently issued two proposals to enhance the requirements
for (1) auditing accounting estimates, including fair value measurements and (2)
an auditors use of the work of specialists.
The comment deadline for the two proposals is August 30.

Resources: The PCAOBs final standard, and proposals about auditing
estimates and the auditors use of the work of specialists
Projects and
3 agenda priorities
Potential changes to consolidation guidance, including
optional private company exemption
The FASB plans to propose a new accounting alternative that would exempt
private companies from the requirement to apply the variable interest entity
(VIE) consolidation guidance to interests in other private companies that are
under common control. To qualify for the exemption, the reporting entity, the
common control parent and the legal entity being evaluated for consolidation
cannot be public business entities.
The accounting alternative would be an accounting policy election and would
require enhanced disclosures.
The Board also plans to propose removing from US GAAP the current private
company alternative for common control leasing arrangements.
A proposed ASU is forthcoming.
FASB proposes improvements to accounting for insurance

contracts
The FASB recently discussed comments received on its proposed accounting
standard that would change how insurance entities recognize, measure,
present and disclose long-duration insurance contracts. At an April 19 public
roundtable meeting, the FASB discussed its proposals with stakeholders and
will redeliberate issues raised at a future meeting.
The proposed improvements to long-duration insurance contracts primarily
address these issues.
The liability for future policy benefits. The proposal would require
insurers to update cash flow assumptions at the same time every year,
unless experience indicates that more frequent updates are necessary.
Insurers would update the high-quality, fixed-income instrument yield used
for the discount rate quarterly.
Contracts with market-risk benefits. The proposed guidance would
change the accounting for certain options and guarantees embedded in
variable products.
Deferred acquisition costs. The proposal would simplify the amortization
process.
Disclosures. The proposal would enhance the effectiveness of disclosures
about the liability for future policy benefits, policyholder account balances,
market-risk benefits, deferred acquisition costs, and separate account
assets and liabilities.
Projects and agenda priorities
The changes would apply to only those insurance entities within the scope of
US GAAP guidance related to insurance contracts (ASC 944). It would exclude
holders of insurance contracts and contracts issued by non-insurance entities.
Resources: KPMGs Issues & Trends In Insurance, FASB proposes targeted
improvements for long-duration insurance contracts; Proposed ASU
EITF to address costs incurred in certain cloud computing

arrangements
The FASB added to its agenda a project about a customers accounting for
implementation costs incurred in a cloud computing arrangement that is
considered a service contract. The project will be addressed by the Emerging
Issues Task Force (EITF).
The next EITF meeting is scheduled for July 20.
Recommended reading
4 and CPE opportunities
The revenue recognition quandary
In a byline article for Financial Manager, KPMGs Mark Callihan advises that
there is little industry-specific guidance about how broadcast TV companies
should implement the new revenue recognition standard. The lack of guidance
has fueled a debate about the effect of the new standard on the industry.
Callihan says the accounting for network TV programming is at the crux of the
industry debate. Read the article.
Staying ahead in a volatile tax landscape

In a byline article for Texas CEO Magazine, KPMGs Randy Sledge says it is
critical for CFOs, board members and tax departments to keep a close eye on
key tax issues. Sledge attributes tax as a key driver of success in 21st-century
organizations, especially as the likelihood of substantive US corporate tax
reform seems more certain than in several decades. Sledge provides a short list
of action items business leaders can take to stay on top of taxes in 2017. Read
the article.
Federal tax reform could have big effect on states

In a byline article for CFO.com, KPMGs Larry Cusack advises that although
attention is predominantly focused on the federal tax effects of reform, it is
worth noting that, if enacted, federal reform would have a significant effect on
states and their income tax structures. Corporate tax and finance leaders should
focus now on the potential effects of federal tax reform on the state level and
on their companys state tax position that would derive from the current
proposals. Read the article.
Upcoming CPE opportunities

KPMG Executive Education provides a wide range of accounting and finance
continuing professional education (CPE) programs in several formats: public
seminars, customized on-site instructor-led classes, web-based self-study
programs and live webcasts.
For more information, contact the KPMG Executive Education team at
uskpmglearning@kpmg.com or 201-505-6062.
Recommended reading and CPE opportunities
Visit KPMGs Financial Reporting View (FRV) for additional CPE opportunities,
including registration information for upcoming CFO Financial Forum
webcasts. The webcasts feature KPMG professionals discussing current and
forthcoming accounting and financial reporting matters, and implementation
guidance for new accounting standards.
Appendix Accounting
5 standards effective dates
4 Accounting standards affecting public companies in 2017
Calendar year-end public companies are required to begin applying these
accounting standards in 2017.
Topic
Effective date for public
For more information
companies
Amendments to SEC On issuance ASU 2017-03

paragraphs pursuant to (January 2017)
staff announcements at the
September 22, 2016 and
November 17, 2016 EITF
meetings
Simplifying the Annual and interim periods ASU 2015-11

measurement of inventory in fiscal years beginning Defining Issues 15-33
after 12/15/2016 Podcast
Simplifying the Annual and interim periods ASU 2015-17

presentation of deferred in fiscal years beginning Defining Issues 15-55
taxes after 12/15/2016 Podcast
Effect of derivative contract Annual and interim periods ASU 2016-05

novations on existing in fiscal years beginning Defining Issues 15-53
hedge accounting after 12/15/2016 Podcast
relationships
Contingent put and call Annual and interim periods ASU 2016-06
options in debt instruments in fiscal years beginning Defining Issues 15-53
Simplifying the transition to Annual and interim periods ASU 2016-07

the equity method of in fiscal years beginning Defining Issues 16-9
accounting after 12/15/2016 Podcast
Improvements to employee Annual and interim periods ASU 2016-09

share-based payment in fiscal years beginning Defining Issues 16-11
Consideration of interests Annual and interim periods ASU 2016-17

held through related parties in fiscal years beginning Defining Issues 16-35
under common control after 12/15/2016 Podcast
Appendix Accounting standards effective dates

Topic For more information
companies
Technical corrections Most amendments were ASU 2016-19

(December 2016) effective on issuance
(December 2016). Certain
amendments that require
transition guidance are
effective for annual and
interim periods in fiscal
12/15/2016.
Accounting standards affecting public companies in 2018 and

beyond
Calendar year-end public companies are required to begin applying these
accounting standards in 2018 or later and may need to disclose their potential
effects in 2017.

companies
Revenue recognition Annual and interim ASU 2014-09
periods in fiscal years ASU 2015-14
beginning after ASU 2016-08
12/15/2017
ASU 2016-10
ASU 2016-11
ASU 2016-12
ASU 2016-20
KPMGs webpage on
Revenue
Recognition and Annual and interim ASU 2016-01
measurement of financial periods in fiscal years KPMGs webpage on
assets and financial beginning after Financial instruments
liabilities 12/15/2017
Recognition of breakage Annual and interim ASU 2016-04
for certain prepaid stored- periods in fiscal years Defining Issues 15-53
value products beginning after Podcast
12/15/2017
Statement of cash flows - Annual and interim ASU 2016-15
classification of certain periods in fiscal years Defining Issues 16-22
cash receipts and beginning after Podcast
payments 12/15/2017
Intra-entity transfers of Annual and interim ASU 2016-16
assets other than periods in fiscal years Defining Issues 16-34
inventory beginning after Podcast
12/15/2017
Statement of cash flows - Annual and interim ASU 2016-18
presentation of restricted periods in fiscal years Defining Issues 16-32
cash beginning after Podcast
12/15/2017
firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (KPMG International), a Swiss entity. Quarterly Outlook March 2017 | 19

companies
Clarifying the definition of Annual and interim periods ASU 2017-01
a business in fiscal years beginning Defining Issues 17-1
after 12/15/2017 Webcast
Clarifying the scope of Annual and interim periods ASU 2017-05
asset derecognition in fiscal years beginning Defining Issues 17-6
guidance and accounting after 12/15/2017 Podcast
for partial sales of
nonfinancial assets
Improving the Annual and interim periods ASU 2017-07
presentation of net in fiscal years beginning Defining Issues 17-8
periodic pension cost and after 12/15/2017 Podcast
net periodic
postretirement benefit
cost
Scope of modification Annual and interim periods ASU 2017-09
accounting for share- in fiscal years beginning Web article
based payment awards after 12/15/2017
Identifying the customer Annual and interim periods ASU 2017-10
in a service concession in fiscal years beginning Web article
arrangement after 12/15/2017 Podcast
Leases Annual and interim periods ASU 2016-02
in fiscal years beginning KPMGs webpage on
after 12/15/2018 Leases
Measurement of credit SEC filers: Annual and ASU 2016-13
losses on financial interim periods in fiscal Defining Issues 16-23
instruments years beginning after KPMGs webpage on
12/15/2019 Financial instruments
Non-SEC filers: Annual
and interim periods in fiscal
12/15/2020
Premium amortization for Annual and interim periods ASU 2017-08
purchased callable debt in fiscal years beginning Defining Issues 17-11
securities after 12/15/2018 Podcast
Simplifying the test for SEC filers: Annual and ASU 2017-04
goodwill impairment interim periods in fiscal Defining Issues 17-5
years beginning after Podcast
12/15/2019
Non-SEC filers: Annual
and interim periods in fiscal
12/15/2020
Accounting standards affecting private companies in 2017

Calendar year-end private companies are required to begin applying these
accounting standards in 2017.
Effective date for private

companies
Eliminating certain Annual and interim periods ASU 2015-07

investments from the fair in fiscal years beginning Defining Issues 15-20
value hierarchy table after 12/15/2016 Podcast
Simplifications for Annual and interim periods ASU 2015-12

employee benefit plans in fiscal years beginning Defining Issues 15-36
Simplifying the transition to Annual and interim periods ASU 2016-07

the equity method of in fiscal years beginning Defining Issues 16-9
Consolidation Annual periods in fiscal ASU 2015-02

years beginning after Defining Issues 15-6
12/15/2016, and interim Webcast
periods in fiscal years
beginning after 12/15/2017
Practical expedient for the Annual periods in fiscal ASU 2015-04

measurement date of an years beginning after Defining Issues 15-17
employer's defined benefit 12/15/2016, and interim
obligation and plan assets periods in fiscal years
Disclosures about short- Annual periods in fiscal ASU 2015-09

duration insurance years beginning after Issues & Trends In
contracts 12/15/2016, and interim Insurance 15-4
Simplifying the Annual periods in fiscal ASU 2015-11

measurement of inventory years beginning after Defining Issues 15-33
12/15/2016, and interim Podcast
Simplifying measurement- Annual periods in fiscal ASU 2015-16

period adjustments years beginning after Defining Issues 15-43
Consideration of interests Annual periods in fiscal ASU 2016-17

held through related parties years beginning after Defining Issues 16-35
under common control 12/15/2016, and interim Podcast

companies
Clarifying when a not-for- Annual periods in fiscal ASU 2017-02

profit entity that is a years beginning after Defining Issues 17-4
general partner or a limited 12/15/2016, and interim Podcast
partner should consolidate periods in fiscal years
a for-profit limited beginning after 12/15/2017
partnership or similar entity
Technical corrections Most amendments were ASU 2016-19

(December 2016) effective on issuance
(December 2016). Certain
amendments that require
transition guidance are
effective for:
annual and interim
beginning after
12/15/2016 (for fair
value measurements);
annual periods in fiscal
12/15/2017, and
interim periods in
fiscal years beginning
after 12/15/2018 (for
cloud computing
arrangements).
Accounting standards affecting private companies in 2018

and beyond
Calendar year-end private companies are required to begin applying these
accounting standards in 2018 or later.

companies
Scope of modification Annual and interim periods ASU 2017-09

accounting for share-based in fiscal years beginning Web article
payment awards after 12/15/2017
Simplifying the Annual periods in fiscal ASU 2015-17

presentation of deferred years beginning after Defining Issues 15-55
taxes 12/15/2017, and interim Podcast
Effect of derivative contract Annual periods in fiscal ASU 2016-05

novations on existing years beginning after Defining Issues 15-53
hedge accounting 12/15/2017, and interim Podcast
relationships periods in fiscal years

companies
Contingent put and call Annual periods in fiscal ASU 2016-06

options in debt instruments years beginning after Defining Issues 15-53
Improvements to employee Annual periods in fiscal ASU 2016-09

share-based payment years beginning after Defining Issues 16-11
accounting 12/15/2017, and interim Podcast
Presentation of financial Annual periods in fiscal ASU 2016-14

statements of not-for-profit years beginning after
entities 12/15/2017, and interim
Revenue recognition Annual periods in fiscal ASU 2014-09

years beginning after ASU 2015-14
12/15/2018, and interim ASU 2016-08
ASU 2016-10
ASU 2016-12
ASU 2016-20
KPMGs webpage on
Revenue
Recognition and Annual periods in fiscal ASU 2016-01

measurement of financial years beginning after KPMGs webpage on
assets and financial 12/15/2018, and interim Financial instruments
liabilities periods in fiscal years
Recognition of breakage for Annual periods in fiscal ASU 2016-04

certain prepaid stored-value years beginning after Defining Issues 15-53
products 12/15/2018, and interim Podcast
Statement of cash flows - Annual periods in fiscal ASU 2016-15

classification of certain years beginning after Defining Issues 16-22
cash receipts and 12/15/2018, and interim Podcast
payments periods in fiscal years
Intra-entity transfers of Annual periods in fiscal ASU 2016-16

assets other than inventory years beginning after Defining Issues 16-34

companies
Statement of cash flows - Annual periods in fiscal ASU 2016-18

presentation of restricted years beginning after Defining Issues 16-32
cash 12/15/2018, and interim Podcast
Clarifying the definition of a Annual periods in fiscal ASU 2017-01

business years beginning after Defining Issues 17-1
12/15/2018, and interim Webcast
Clarifying the scope of Annual periods in fiscal ASU 2017-05

asset derecognition years beginning after Defining Issues 17-6
guidance and accounting 12/15/2018, and interim Podcast
for partial sales of periods in fiscal years
nonfinancial assets beginning after 12/15/2019
Employee benefit plan Annual periods in fiscal ASU 2017-06

master trust reporting years beginning after
12/15/2018
Improving the presentation Annual periods in fiscal ASU 2017-07

of net periodic pension cost years beginning after Defining Issues 17-8
and net periodic 12/15/2018, and interim Podcast
postretirement benefit cost periods in fiscal years
Identifying the customer in Annual periods in fiscal ASU 2017-10

a service concession years beginning after Web article
arrangement 12/15/2018, and interim Podcast
Leases Annual periods in fiscal ASU 2016-02

years beginning after KPMGs webpage on
12/15/2019, and interim Leases
Premium amortization for Annual periods in fiscal ASU 2017-08

purchased callable debt years beginning after Defining Issues 17-11
securities 12/15/2019, and interim Podcast
Measurement of credit Annual periods in fiscal ASU 2016-13

losses on financial years beginning after Defining Issues 16-23
instruments 12/15/2020, and interim KPMGs webpage on
periods in fiscal years Financial instruments

companies
Simplifying the test for Annual and interim periods ASU 2017-04
goodwill impairment in fiscal years beginning Defining Issues 17-5
Contact us
Angie Storm
Partner
Department of Professional Practice
KPMG LLP
Robin Van Voorhies

Senior Manager
Department of Professional Practice
KPMG LLP
kpmg.com/socialmedia
The descriptive and summary statements in this newsletter are not intended to be a substitute for the texts of the FASB Codification, FASB pronouncements, EITF Consensuses, IFRS
standards, SEC staff announcements, PCAOB requirements, or any other potential or actual accounting literature or SEC regulations. Companies applying US GAAP or filing with the SEC
should apply the texts of the relevant laws, regulations, and accounting requirements, consider their particular circumstances, and consult their accounting and legal advisors.
2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved. NDPPS 671801
The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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SEC staff comments

Other recurring SEC staff comments about ICOFR focus on:

inconsistent conclusions e.g. concluding that disclosure controls and

SEC rulemaking developments

Initiative to modernize Guide 3

Income tax implications of Brexit

expected to materially affect their business, registrants should consider

Implementing the new lease accounting standard

creating an inventory of all leases;

Moving forward on financial instruments

Identifying the customer in a service concession arrangement

Modification accounting in share-based payment awards

Shortened premium amortization period for certain callable

Effective dates and early adoption provisions

Annual periods In fiscal

Early adoption allowed? Yes, including adoption in an interim period.

Resources: KPMGs Defining Issues, FASB changes premium amortization

Separate presentation for service cost component of net

Effective dates and early adoption provisions

Annual periods In fiscal

Resources: KPMGs Defining Issues, FASB separates service cost component

Effective date clarification for new goodwill impairment

PCAOB adopts new standard to enhance the auditors report;

The new requirements apply to audits conducted under PCAOB standards.

The comment deadline for the two proposals is August 30.

FASB proposes improvements to accounting for insurance

EITF to address costs incurred in certain cloud computing

Staying ahead in a volatile tax landscape

Federal tax reform could have big effect on states

Upcoming CPE opportunities

Amendments to SEC On issuance ASU 2017-03

Simplifying the Annual and interim periods ASU 2015-11

Simplifying the Annual and interim periods ASU 2015-17

Effect of derivative contract Annual and interim periods ASU 2016-05

Simplifying the transition to Annual and interim periods ASU 2016-07

Improvements to employee Annual and interim periods ASU 2016-09

Consideration of interests Annual and interim periods ASU 2016-17

Effective date for public

Technical corrections Most amendments were ASU 2016-19

Accounting standards affecting public companies in 2018 and

Effective date for public

Effective date for public

Accounting standards affecting private companies in 2017

Effective date for private

Eliminating certain Annual and interim periods ASU 2015-07

Simplifications for Annual and interim periods ASU 2015-12

Simplifying the transition to Annual and interim periods ASU 2016-07

Consolidation Annual periods in fiscal ASU 2015-02

Practical expedient for the Annual periods in fiscal ASU 2015-04

Disclosures about short- Annual periods in fiscal ASU 2015-09

Simplifying the Annual periods in fiscal ASU 2015-11

Simplifying measurement- Annual periods in fiscal ASU 2015-16

Consideration of interests Annual periods in fiscal ASU 2016-17

Effective date for private

Clarifying when a not-for- Annual periods in fiscal ASU 2017-02

Technical corrections Most amendments were ASU 2016-19

Accounting standards affecting private companies in 2018

Effective date for private

Scope of modification Annual and interim periods ASU 2017-09

Simplifying the Annual periods in fiscal ASU 2015-17

Effect of derivative contract Annual periods in fiscal ASU 2016-05

Effective date for private

Contingent put and call Annual periods in fiscal ASU 2016-06