ASU 2010-04 – Technical Corrections to SEC Paragraphs and ASU 2010-08 – Technical Corrections to Various Topics

These two ASUs do not change GAAP but make some clarifications and changes in terminology. Most of the changes are to change to the new Codification terminology including changing minority interest to non-controlling interest. Below are the highlights:

 
FASC 855-10-S99-2 - Issuance of Financial Statements removes the word “not” from the following statement in footnote 4. “Posting financial statements to a registrant’s web site would not be considered wide distribution to all shareholders…” 
 
With the advances in technology, more people are using the internet to get information and documents posted on a company’s website can be assumed to be widely distributed.
 
FASC 805-20-S99-3 – Use of Residual Method to Value Acquired Assets Other than Goodwill adds wording that clarifies the difference between goodwill and other identifiable intangible assets. It states that the residual method should no longer be used to value intangible assets other than goodwill.
 
FASC 320-10-S99-2 - Adjustments in Assets and Liabilities for Holding Gains and Losses as Related to the Implementation of Subtopic 320-10 removes the following statement: “registrants should adjust minority interest for a portion of the unrealized holding gains and losses from securities classified as available for sale if those gains and losses relate to securities that are owned by a less than wholly-owned subsidiary whose financial statements are consolidated.” 
 
This statement was superseded by FAS 160 – Non-controlling interest that requires 100% amounts to be included in the financial statements of the majority owner with any gains or losses to the non-controlling interest being added or subtracted from net income.
 
FASC 715-20-S99-1 – Selection of Discount Rate Used for Measuring Defined Benefit Pension Obligation and Obligations of Postretirement Plans Other than Pensions removed a paragraph concerning using high-quality fixed income investments as a proxy for the discount rate.
 
FASC 605-20-S99-1 – Accounting for Management Fees Based on a Formula removes footnote 1 which gave general managers an option to continue applying previous accounting guidance.
 
FASC 805-50-30-3 - Business Combinations – Allocating Costs clarifies that the “allocated cost of an asset that the entity does not intend to use or intends to use in a way that is not its highest or best use … shall be determined based on its relative fair value.”
 
FASC 815-15-25-6 – Derivatives and Hedging – Embedded Derivatives clarifies that in applying the provisions of FASC 815-15-25-1 “an embedded derivative in which the only underlying is an interest rate or interest rate index…is considered to be clearly and closely related.”
 
FASC 815-30-35-3 – Derivatives and Hedging – Cash Flow Hedges adds a paragraph that clarifies that if a cash flow hedge is not effective for a reporting period – the change in the market value for that reporting period is not to be included in Other Comprehensive Income even if it is still probable that the hedge is effective. This situation would occur if the retrospective effectiveness test showed the hedge to be ineffective, but the prospective effectiveness test does show the hedge as being effective. (Confusing, I know.)
 
FASC 852-740-45-2 – Reorganizations – Income Taxes has been deleted. It referred to the presentation of deductible temporary differences between pre-reorganization and post-reorganization. 

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Linda is a CPA living in Southwestern Ohio, working as a research accountant for an investor-owned publicly traded utility company. She specializes in implementing new FASB and SEC requirements and FAS 133 derivative issues. In her role at the utility she has encountered many issues and written many memos, so send in your implementation and derivative issues and Linda will help figure out an answer.

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