ASC 420 establishes an accounting model for costs associated with exit or disposal activities based on the FASB’s conceptual framework for recognition of liabilities and fair value measurements. For example, voluntary termination benefits are often offered as part of a larger restructuring event. KPMG’s Global Trading Tax Services (“GTT Services”) are provided by highly skilled and experienced professionals who focus on international tax issues that confront the No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. By the end of this course, participants should be able to: Keywords: Restructuring, Termination Benefits, ASC 420, ASC 712. 6. 2 Upon the adoption of ASC 842, the right-of-use asset will be evaluated for impairment under ASC 360. the accounting depends on whether those benefits are akin to defined contribution or defined benefit arrangements. KPMG does not provide legal advice. In For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. Facts: FASB ASC paragraph 320-10-35-33 (Investments—Debt and Equity Securities Topic) does not define the phrase “other than temporary” for available-for-sale equity securities. Here we offer our latest thinking and top-of-mind resources. The current global environment and economic slowdown is forcing many companies to resize their workforce either temporarily or permanently. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. IFRS Standards apply a single accounting approach; US GAAP does not. This right-of-use asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, that is applied to other property, plant, and equipment. following a similar formula). Connect with us via webcast, podcast, or in person at industry events. However, payments to an employee during the legal notice period, when the employee is no longer required to perform services for the company to receive the payment, are in the scope of the termination benefits guidance. Under US GAAP, any one-time enhancement made to an existing arrangement, or a one-time termination benefit paid in connection with an exit activity, is accounted for under ASC 420. Additionally, upon adoption of the new standard, companies will cease applying ASC 420, Exit and Disposal costs, to lease arrangements. ©2001–2015 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of ... liability is recognized in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. Share with your friends. Contents. Share with your friends. Read more. Under IAS 19, the recognition of involuntary termination benefits that are not part of a larger restructuring requires communication to the affected employees, with the specificity required by IAS 19. Improving business performance, turning risk and compliance into opportunities, developing strategies and enhancing value are at the core of what we do for leading organizations. special promotions, or general inquiries, please contact us as follows: Phone: +1 (201) 505-6062 5. Our comprehensive handbooks include discussion and analysis of significant issues for professionals in accounting and financial reporting. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. These arrangements allow a company to save costs but ultimately retain their workforce until some or all of those employees can return to work. ASC 320-10-35-17 through 35-37 and SEC Staff Accounting Bulletin Topic 5.M, “Other Than Temporary Impairment of Certain Investments in Equity Securities,” provide guidance on evaluating whether an impairment is other than temporary. 24 ASC 340 Other Assets and Deferred Costs 389. required by the terms of the severance plan due to a plant closure) are considered contractual termination benefits and within the guidance on other post-employment benefits. of Professional Practice, KPMG US. Here we provide an overview of what we consider to be the top 10 differences between IFRS Standards and US GAAP related to termination benefit and furlough arrangements. All rights reserved. For voluntary and involuntary benefits, including furloughs, depending on the type of benefit, one of the following applies: 2. If there are benefits paid, and the employee is furloughed, there is specific guidance on non-accumulating paid absences. IAS 19 does not specifically address contractual severance benefits. Involuntary one-time termination benefits – accounting for service requirements. Overview. Their recruiter always brings cookies to events on campus. As a result, differences may exist between US GAAP and IFRS Standards for the recognition timing and the measurement of contractual severance benefits. if it occurred earlier than the termination). Accounting for exit and disposal costs (and related termination benefits) depends on a variety of factors that will also be covered in this course, such as the timing of recognition, measurement and classification. KPMG is a global network of professional firms providing Audit, Tax & Advisory services. To thrive in today's marketplace, one must never stop learning. ©2001–2015 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of ... liability is recognized in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. From the IFRS Institute – August 28, 2020. Judgment is often required in making this distinction and will depend on the relevant facts and circumstances. KPMG's Accounting Research Online provides easy access to a full range of authoritative accounting and financial reporting literature from regulatory and standard-setting bodies such as the IASB and FASB, and in-depth interpretive guidance from KPMG. 8. Determining whether an employee is active or inactive during the furlough period requires judgment, and the outcome under US GAAP may not always be the same as under IFRS Standards. 73 reviews from KPMG employees about KPMG culture, salaries, benefits, work-life balance, management, job security, and more. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. They may or may not be for a specified period of time. IFRS 16 amendments provide relief to lessees in accounting for rent concessions. US GAAP, for more insights on the differences between IFRS Standards and US GAAP for defined benefit plans. when communicated to the employee) and reasonably estimable. Contents. Under IAS 19, timing of recognition for termination benefits may depend on whether they are part of a larger restructuring event (e.g. Alternatively, if a company has no written severance plan, and has not historically established a substantive on-going plan through multiple prior termination events, the severance benefits to be provided to the impacted employees would be considered a one-time termination benefit accounted for under ASC 420-10. Our multi-disciplinary approach and deep, practical industry knowledge, skills and capabilities help our clients meet challenges and respond to opportunities. Careful judgment is required to appropriately classify benefits based on the nature and terms of the underlying arrangements. Overall, the goal of these new standards is to enhance transparency into the liabilities that result from leasing arrangements, particularly operating leases.. Your feedback or suggestions about our website and training courses will help Welcome to EY.com. The term authoritative includes all level AD GAAP that has been issued by a standard setter. recall the presentation and disclosure requirements associated with restructuring activities. However, under US GAAP, if a company determines that furloughed employees are inactive, furlough benefit costs are generally accrued when they are probable (e.g. As such, accounting for furloughs has similarities to termination benefit accounting. Under US GAAP, enhanced termination benefits may or may not be recognized in the same period as the base termination benefits (see #4), resulting in differences from IFRS Standards. ASC 420, Exit or Disposal Cost Obligations, applies to termination benefits provided to current employees that are involuntarily terminated under the terms of a benefit arrangement that applies for a specified termination event or for a specified future period. IAS 19’s measurement criteria for termination benefits are based on the nature of the employee benefit provided. One-time termination benefits – accounting for changes in interest rates for long-term benefits. Handbook: Share-based payments December 08, 2020 Insights Industries Services Careers Open in new tab or window; About us Open in new tab or window; Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. An important distinction in accounting for employee termination benefits is whether those measures are voluntary or involuntary. Involuntary termination benefits – timing of recognition. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. © 2020 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 3. ASC 712, Compensation—Nonretirement Postemployment Benefits, ASC 715, Compensation—Retirement Benefits. The first four chapters provide an introduction and guidance on determining whether an Abstract ASC 420, Exit or Disposal Cost Obligations, applies to termination benefits provided to current employees that are involuntarily terminated under the terms of a benefit arrangement that applies for a specified termination event or for a specified future period. The term authoritative includes all level AD GAAP that has been issued by a standard setter. Comparability is the challenge 1 About the standards 2 About this publication 4 A. ASU 2016-02 also amends ASC 420 to exclude costs to terminate a lease from the scope of ASC 420. We look forward to hearing from you! The nature and financial effects of each event or transaction ASC 225-20-45-16 states a material event or transaction that an entity considers unusual, infrequent or both is reported as a separate component of income from continuing operations. 23 ASC 330 Inventory 349. Either may require discounting if the effect is material. 7. kpmg.com ASC 740 Income Taxes Summary of worldwide taxation of income and gains derived from listed securities . In contrast, a furlough is a mandatory temporary leave of absence from which the employee is expected to return to work or be restored from a reduced work schedule. 420-10-15 Scope — Deloitte Q&As Distinguishing One-Time Termination Benefits From Ongoing Benefit Arrangements — Substantive Ongoing Benefit Arrangement — 420-10 … Termination benefits offered in a larger restructuring event – timing of recognition. I told her I hadn’t had any breakfast yet. Nonretirement post-employment benefits – accounting for contractual severance benefits. Early adoption is permitted. Involuntary contractual termination benefits – communication to employees. Everyone at KPMG in my area are the nicest people I’ve ever met. 25 ASC 350 Intangibles—Goodwill and Other 405. Companies may decide to provide additional or enhanced termination benefits along with the employee’s base termination benefits. In Tune in to KPMG Advisory podcasts to hear perspectives on today's business issues. For example, one-time payments that require services through the legal notice period (or in its absence 60 days) are accrued when there is a present obligation, which arises as of the communication date, unlike IAS 19. Under IAS 19, benefits that require future services (even until the end of the legal notice period) are not considered termination benefits and are accounted for as normal compensation expense as and when the services are provided. These are what we consider to be the top 10 accounting differences for termination and furlough arrangements between IFRS Standards and US GAAP. Those benefits can be offered as part of a larger restructuring event or separately. The FASB Accounting Standards Codification simplifies user access to all authoritative U.S. generally accepted accounting principles (GAAP) by providing all the authoritative literature related to a particular Topic in one place. 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