accounting issues for the pork industry t.j. boyle, cpa june 2014

Accounting Issues for the Pork Industry

T.J. Boyle, CPA

June 2014

Frost, PLLC | 425 West Capitol Avenue, Suite 3300 | Little Rock, AR 72201 | 501.376.9241 | www.frostpllc.com

Key Items

• Leases• Revenue Recognition• Private company options• PEDV– Inventory values– Audit Implications

Leases

• Very slow moving forward• Basics– All leases become capital leases– Major changes to the balance sheet, income

statement and cash flows– Major implications on debt covenants

Revenue Recognition

• Expected to complete in the next year• Major changes to many industries• Reason for issuing – many different standards

for all different industries• Will add more disclosures

Revenue Recognition (cont.)

• General Principles– Identify contract with customer– Performance obligation in the contract– Determine transaction price– Allocate to the obligations in the contract– Recognize the revenue when (or as) performance

obligation is satisfied

Private Company Considerations

• Private Company Council• Goodwill• Interest Rate Swaps• Variable Interest Entities• AICPA – Reporting for Small and Medium Sized

Entities

Goodwill option

– Amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate

– This is optional for private companies and is not required

Interest Rate Swaps

• Allows the use of the simplified hedge approach for swaps that are entered into to convert a variable-rate borrowing into a fixed-rate borrowing

• Private Company option• Only for “plain vanilla swaps”

Variable Interest Entities

• a private company lessee (the reporting entity) to elect an alternative not to apply VIE guidance to a lessor entity if – (a) the private company lessee and the lessor entity are under

common control, – (b) the private company lessee has a lease arrangement with the

lessor entity, – (c) substantially all of the activities between the private company

lessee and the lessor entity are related to leasing activities (including supporting leasing activities) between those two entities, and

– (d) if the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the asset leased by the private company,

AICPA Reporting for SME’s

• To be a more usable framework for small business owners and their users

• Potential Benefits –– Cost beneficial– Stable framework– Designed for SME’s– Concepts based

AICPA Reporting for SME’s

• Similar to GAAP, but not considered GAAP

• Would need approval from lenders • May not be necessary based on

changes from the Private Company Council for US GAAP

Impact of PEDV

• Inventory Valuations• Hedging• Not considered extraordinary item– Will be reported as a part of operations

• Consider additional disclosures

Impact of PEDV (cont.)

• Audit implications– Many banks are currently suspending onsite

reviews– Potential impacts –• Additional alternative procedures – best for contract

growers• Additional shipping document review• Smaller onsite samples• Others

Comments, Thoughts or Items to Share?

T.J.Boyle, CPAFROST, PLLC

TBOYLE@FROSTPLLC.COM501.376.9241

accounting issues for the pork industry t.j. boyle, cpa june 2014

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