Alert: FASB Accounting Standards Update No. 2017-08 – Receivables: Non-refundable Fees and Other Costs

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2017-08 – Receivables: Non-refundable Fees and Other Costs

On March 31, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08 Receivables: Non-refundable Fees and Other Costs (Subtopic 310-20). The ASU seeks to enhance the accounting for the amortization of premiums for certain purchased callable debt securities.

Under current GAAP, callable debt securities’ premiums or discounts are generally amortized to their maturity date. If such callable debt securities are subsequently called, a loss is recorded equal to the unamortized premium.

The new guidance requires entities to amortize premiums for callable debt securities to the earliest call date resulting in a shorter amortization period. As a result, interest income recorded on callable debt securities held at a premium will be more similar to the expectations incorporated in the market pricing of those securities. This ASU does not prescribe any changes for securities held at a discount; discounts continue to be amortized to maturity.

The amendments are effective, as follows:

  • Public business entities – fiscal years beginning after December 15, 2018, including interim periods therein.
  • All other entities – fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption, including in an interim period, is permitted. Adjustments resulting from the early adoption of this ASU in an interim period should be reflected as of the beginning of the fiscal year that includes that interim period.

The modified-retrospective approach is used when applying the ASU. This is accomplished via a cumulative-effect adjustment recognized directly to retained earnings as of the beginning of the fiscal year of adoption. Disclosures about the change in accounting principle is required in the period of adoption.

To access the full script of ASU No. 2017-08, click here.

This communication contains a general overview of the topic and is current as of March 31, 2017. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2017. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.