American Home Shield 2015 Annual Report Download - page 84

Table of Contents
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Newly Issued Accounting Standards
In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-08, “Reporting Discontinued
Operations and Disclosure of Disposals of Components of an Entity” to change the criteria for reporting discontinued operations and
enhance the convergence of the FASB’s and the International Standard Board’s reporting requirements for discontinued operations.
The changes in ASU 2014-08 amend the definition of discontinued operations by limiting discontinued operations reporting to
disposals of components of an entity that represent strategic shifts that have or will have a major effect on an entity’s operations and
financial results. ASU 2014-08 requires expanded disclosures for discontinued operations and also requires an entity to disclose the
pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting.
ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of
this standard did not have a material impact on the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” to provide a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers. This model supersedes most current revenue
recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or
modified approach to adopt the guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2017. Early adoption is permitted for fiscal years, and interim period within those years, beginning after December
15, 2016. The Company is currently evaluating the impact of adopting ASU 2014-09.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” to change the
presentation of debt issuance costs in financial statements as part of the FASB’s simplification initiative. Under previous guidance, an
entity reported debt issuance costs in the balance sheet as deferred charges (i.e., as an asset). The ASU specifies that “debt issuance
costs related to a note shall be reported in the balance sheet as a direct deduction from the face amount of that note” and that
“amortization of debt issuance costs also shall be reported as interest expense.” ASU 2015-03 is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2015. As allowed by ASU 2015-03, the Company has elected to early adopt
the amendments of this ASU as of December 31, 2015. The adoption of ASU 2015-03 has been accounted for as a change in
accounting principle resulting in the retrospective presentation of debt issuance costs as a direct deduction from the face amount of
debt. The Company historically and currently reports the amortization of debt issuance costs as interest expense. As a result of the
implementation of this ASU, $31 million of debt issuance costs, as of December 31, 2014, were retrospectively reclassified to Long
Term Debt, and the Debt Issuance Costs line was removed from the Consolidated Statements of Financial Position. The remaining $3
million of debt issuance costs, as of December 31, 2014, were related to the Revolving Credit Facility maturing in 2019 and have been
reclassified to Other Assets.
In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” to change the
classification of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) in financial statements as part of the FASB’s
simplification initiative. Under previous guidance, an entity presented DTAs and DTLs as current and noncurrent in the balance sheet.
The ASU specifies that “an entity shall classify deferred tax liabilities and assets as noncurrent amounts.” ASU 2015-17 is effective
for fiscal years, and interim periods within those years, beginning after December 15, 2016. As allowed by ASU 2015-17, the
Company has elected to early adopt the amendments of this ASU. The adoption of ASU 2015-17 has been accounted for as a change
in accounting principle with retrospective reclassification of current DTAs and DTLs to noncurrent. As a result of the implementation
of this ASU, $76 million of current DTAs, as of December 31, 2014, were retrospectively reclassified to noncurrent and netted Other
long term liabilities – Deferred taxes, and the Deferred taxes line within Assets was removed from the Consolidated Statements of
Financial Position.
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial
Liabilities” to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of
financial liabilities measured under the fair value option that are attributable to a company’s own credit, and to change certain other
disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity
securities be recognized in net income. The Company is impacted as unrealized gains or losses on the Company’s available-for-sale
securities are currently recognized in other comprehensive income. The amendments in ASU 2016-01 are effective for fiscal years,
and interim periods within those years, beginning after December 15, 2017, and will be adopted prospectively.
82 2015 Annual Report