Hormel Foods 2014 Annual Report Download - page 44

42
Accounting Changes and Recent Accounting
Pronouncements: In December 2011, the Financial
Accounting Standards Board (FASB) updated the guidance
within ASC 210, Balance Sheet. The update enhances disclo-
sures related to the offsetting of certain assets and liabilities
to enable users of financial statements to understand the
effect of those arrangements on financial position. The
updated guidance was effective for annual reporting periods
beginning on or after January 1, 2013, and interim periods
within those annual periods. The Company adopted the new
provisions of this accounting standard at the beginning of
fiscal year 2014, and adoption did not have a material impact
on the consolidated financial statements.
In February 2013, the FASB updated the guidance within ASC
220, Comprehensive Income. The update requires companies
to report, in one place, information about reclassifications
out of accumulated other comprehensive income (AOCI) and
changes in AOCI balances. For significant items reclassified
out of AOCI to net income in their entirety in the same report-
ing period, reporting is required about the effect of the reclas-
sifications on the respective line items in the statement where
net income is presented. For items that are not reclassified
to net income in their entirety in the same reporting period, a
cross reference to other disclosures currently required under
U.S. generally accepted accounting principles is required. The
above information must be presented in one place, either par-
enthetically on the face of the financial statements by income
statement line item, or in a note. The updated guidance is to
be applied prospectively and was effective for fiscal years, and
interim periods within those years, beginning after December
15, 2012, with early adoption permitted. The Company adopted
the new provisions of this accounting standard at the begin-
ning of fiscal year 2014, and adoption did not have a material
impact on the consolidated financial statements as it relates
to presentation and disclosure only.
In January 2014, the FASB updated the guidance within ASC
323, Investments-Equity Method and Joint Ventures. The update
provides guidance on accounting for investments by a report-
ing entity in flow-through limited liability entities that manage
or invest in affordable housing projects that qualify for the
low-income housing tax credit. The amendments modify the
conditions that a reporting entity must meet to be eligible
to use a method other than the equity or cost methods to
account for qualified affordable housing project investments.
If the modified conditions are met, the amendments permit
an entity to make an accounting policy election to amortize
the initial cost of the investment in proportion to the amount
of tax credits and other tax benefits received and recognize
the net investment performance in the income statement as
a component of income tax expense (benefit). Additionally,
the amendments introduce new recurring disclosures about
all investments in qualified affordable housing projects irre-
spective of the method used to account for the investments.
The updated guidance is to be applied retrospectively and is
effective for fiscal years, and interim periods within those
years, beginning after December 15, 2014, with early adoption
permitted. The Company expects to adopt the new provisions
of this accounting standard at the beginning of fiscal year
2016, and adoption is not expected to have a material impact
on the consolidated financial statements.
In May 2014, the FASB issued ASC 606, Revenue from Contracts
with Customers. This topic converges the guidance within U.S.
generally accepted accounting principles and international
financial reporting standards and supersedes ASC 605,
Revenue Recognition. The new standard requires companies to
recognize revenue to depict the transfer of goods or services to
customers in amounts that reflect the consideration to which
the company expects to be entitled in exchange for those goods
or services. The new standard will also result in enhanced dis-
closures about revenue, provide guidance for transactions that
were not previously addressed comprehensively, and improve
guidance for multiple-element arrangements. The new guid-
ance is effective for annual reporting periods beginning after
December 15, 2016, including interim reporting periods within
that reporting period, and early application is not permitted.
Accordingly, the Company plans to adopt the provisions of this
new accounting standard at the beginning of fiscal year 2018,
and is currently assessing the impact on its consolidated finan-
cial statements.