| SUMMARY OF ACCOUNTING POLICIES | NOTE A - SUMMARY OF ACCOUNTING POLICIES In 2004, Cheviot Savings Bank (the Savings Bank) reorganized into a two-tier mutual holding company structure (the “Reorganization”) and established Cheviot Financial Corp., a federal holding company as the parent of the Savings Bank. On January 18, 2012, we completed our “second-step” conversion to a fully stock company. As a result of the second step conversion, all of our outstanding common stock is held by public shareholders and Cheviot Financial Corp., a Maryland holding company (“Cheviot Financial” or the “Corporation” refers to either Cheviot Financial Corp., the federal corporation or Cheviot Financial Corp., the Maryland corporation depending on the content). The Corporation conducts a general banking business in southwestern Ohio which consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, commercial and consumer purposes. The Corporation’s profitability is significantly dependent on net interest income, which is the difference between interest income generated from interest-earning assets (i.e. loans and investments) and interest expense paid on interest-bearing liabilities (i.e. customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Corporation can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management’s control. The financial information presented herein has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general accounting practices within the financial services industry. In preparing financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates. The following is a summary of significant accounting policies which have been consistently applied in the preparation of the accompanying financial statements. 1. Principles of Consolidation The accompanying consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014, and 2013, include the accounts of the Corporation and its wholly-owned subsidiary, the Savings Bank. All significant intercompany items have been eliminated. 2. Investment and Mortgage-backed Securities The Corporation accounts for investment and mortgage-backed securities using 3 categories: held to maturity, trading, or available for sale. Securities classified as held to maturity are carried at cost only if the Corporation has the positive intent and ability to hold these securities to maturity. Securities available for sale are carried at fair value with resulting unrealized gains or losses recorded in shareholders’ equity. Realized gains or losses on sales of securities are recognized using the specific identification method. 3. Loans Receivable Loans receivable are stated at the principal amount outstanding, adjusted for deferred loan origination fees and the allowance for loan losses. Interest is accrued as earned unless the collectability of the loan is in doubt. Loans are generally placed on nonaccrual status when they are contractually past due 90 days or more. Interest on loans that are contractually past due more than 90 days is charged off, or an allowance is established based on management’s periodic evaluation. The allowance is established by a charge to interest income equal to all interest previously accrued, and income is subsequently recognized only to the extent that cash payments are received until, in management’s judgment, the borrower’s ability to make periodic interest and principal payments has returned to normal, in which case the loan is returned to accrual status. If the ultimate collectability of the loan is in doubt, in whole or in part, all payments received on nonaccrual loans are applied to reduce principal until such doubt is eliminated. Loans held for sale are carried at the lower of cost (less principal payments received) or fair value (market value), calculated on an aggregate basis. At December 31, 2015 and 2014, the Corporation had $1.9 million and $1.3 million in loans held for sale. The Corporation recognizes, as separate assets, rights to service mortgage loans for others, regardless of how those servicing rights are acquired. An institution that acquires mortgage servicing rights through either the purchase or origination of mortgage loans and sells those loans with servicing rights retained must allocate some of the cost of the loans to the mortgage servicing rights at fair value. The Corporation has opted to account for the capitalized servicing rights as being amortized in proportion to and over the estimated period of servicing income. The Corporation recorded mortgage servicing rights totaling $114,000, $(100,000), and $(1,000), net of amortization of $204,000, $250,000, and $281,000, during the years ended December 31, 2015, 2014, and 2013, respectively. The carrying value of the Corporation’s mortgage servicing rights totaled approximately $1.3 million and $1.2 million at December 31, 2015 and 2014, respectively. The Corporation was servicing mortgage loans of approximately $160.4 million and $144.8 million at December 31, 2015 and 2014, respectively, all of which had been sold to the Federal Home Loan Bank of Cincinnati and Federal Home Loan Mortgage Corporation. 4. Loan Origination Fees and Costs Origination fees received from loans, net of direct origination costs, are deferred and amortized to interest income using the level-yield method, giving effect to actual loan prepayments. Additionally, loan origination costs are limited to the direct costs attributable to originating a loan, i.e., principally actual personnel costs. Fees received for loan commitments that are expected to be drawn upon, based on the Corporation’s experience with similar commitments, are deferred and amortized over the life of the loan using the level-yield method. Fees for other loan commitments are deferred and amortized over the loan commitment period on a straight-line basis. 5. Allowance for Loan Losses It is the Corporation’s policy to provide valuation allowances for estimated losses on loans primarily based on past loan loss experience and economic factors such as level of delinquencies, collateral values and overall employment and economy in the market area. Additionally, the Corporation considers changes in the composition of the loan portfolio, trends in the level of delinquent and problem loans, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current and anticipated economic conditions in the primary lending area. When the collection of a loan becomes doubtful, or otherwise troubled, the Corporation records a charge-off equal to the difference between the fair value of the property securing the loan and the loan’s carrying value. Major loans and major lending areas are reviewed periodically to determine potential problems at an early date. The allowance for loan losses is increased by charges to earnings and decreased by charge-offs (net of recoveries). Impaired loans are measured based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or, as an alternative, at the loan’s observable market price or fair value of the collateral if the loan is collateral- dependent. A loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Corporation considers its investment in existing one- to four-family residential loans and consumer installment loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. With respect to the Corporation’s investment in construction, commercial and multi-family residential real estate loans, and its evaluation of impairment thereof, such loans are generally collateral-dependent and, as a result, are carried as a practical expedient at the lower of cost or fair value of collateral. Collateral-dependent loans which are more than ninety days delinquent are considered to constitute more than a minimum delay in repayment and are evaluated for impairment. 6. Real Estate Acquired through Foreclosure Real estate acquired through foreclosure is carried at the lower of the loan’s unpaid principal balance (cost) or fair value less estimated selling expenses at the date of acquisition. A loan loss provision is recorded for any write down in the loan’s carrying value to fair value at the date of acquisition. Real estate loss provisions are recorded if the properties’ fair values subsequently decline below the value determined at the recording date. In determining the lower of cost or fair value at acquisition, costs relating to development and improvement of property are considered. Costs relating to holding real estate acquired through foreclosure, net of rental income, are charged against earnings as incurred. 7. Investment in Federal Home Loan Bank Stock The Corporation is required as a condition of membership in the Federal Home Loan Bank of Cincinnati (FHLB) to maintain an investment in FHLB common stock. The stock is redeemable at par and, therefore, its cost is equivalent to its redemption value. The Corporation’s ability to redeem FHLB shares is dependent on the redemption practices of the FHLB of Cincinnati. At December 31, 2015 and 2014, the FHLB of Cincinnati placed no restrictions on redemption of shares in excess of a member’s required investment in the stock. 8. Office Premises and Equipment Office premises and equipment are carried at cost. Maintenance, repairs and minor renewals are expensed as incurred. For financial reporting, depreciation and amortization are provided on the straight-line and accelerated methods over the useful lives of the assets, estimated to be between fifteen and forty years for buildings and improvements, five to ten years for furniture and equipment and five years for automobiles. An accelerated method is used for tax reporting purposes. 9. Federal Income Taxes The Corporation uses an asset and liability approach to accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A deferred tax liability or deferred tax asset is computed by applying the current statutory tax rates to net taxable or deductible temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements that will result in net taxable or deductible amounts in future periods. Deferred tax assets are recorded only to the extent that the amount of net deductible temporary differences or carryforward attributes may be utilized against current period earnings, carried back against prior years’ earnings, offset against taxable temporary differences reversing in future periods, or utilized to the extent of management’s estimate of future taxable income. A valuation allowance is provided for deferred tax assets to the extent that the value of net deductible temporary differences and carryforward attributes exceeds management’s estimates of taxes payable on future taxable income. Deferred tax liabilities are provided on the total amount of net temporary differences taxable in the future. The Corporation’s principal temporary differences between pretax financial income and taxable income result from different methods of accounting for deferred loan origination fees and costs, Federal Home Loan Bank stock dividends, the general loan loss allowance and credit quality discount on purchased loans, charitable contributions, deferred compensation and stock benefit plans. Additional temporary differences result from depreciation computed using accelerated methods for tax purposes. The Corporation recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Corporation has not recorded any liability for unrecognized tax benefits. The Corporation is subject to income taxes in the U.S. federal jurisdiction, as well as various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Corporation is no longer subject to U.S. federal, state and local, or non U.S. income tax examinations by tax authorities for the tax years before 2012. The Corporation will recognize, if applicable, interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No interest or penalties were recognized in the financial statements for December 31, 2015, 2014, and 2013. 10. Benefit Plans The Corporation has a 401(k) retirement savings plan, which covers all employees who have attained the age of 21 and have completed one year of service. The Corporation is annually required to contribute 3% of eligible employees’ salaries, plus the lesser of 3% of each participant’s salary or 50% of each participant’s contributions, to the plan. Employer contributions totaled $273,000, $297,000, and $326,000 for the years ended December 31, 2015, 2014, and 2013, respectively. The Corporation has a nonqualified directors deferred compensation plan (the “compensation plan”) which provides for the payment of benefits to its directors upon termination of service with the Corporation. The Corporation recorded expense of approximately $63,000, $17,000, and $17,000 for the directors deferred compensation plan for the years ended December 31, 2015, 2014, and 2013. In connection with the 2004 Reorganization, the Corporation implemented an Employee Stock Ownership Plan (“ESOP”) which provides retirement benefits for substantially all full-time employees who have completed one year of service and have attained the age of 21. The Corporation records compensation expense equal to the fair value of ESOP shares allocated to participants during a given year. All shares under this plan were fully allocated and the loan was repaid as of December 31, 2013. In addition, as part of the second step stock conversion, the Corporation purchased an additional 187,000 shares for a new ESOP plan, resulting in a new loan with Cheviot Financial Corporation totaling $1.5 million. Allocation of shares to the ESOP participants is predicated upon the repayment of the loans to Cheviot Financial Corp. totaling $1.3 million at both December 31, 2015 and 2014, respectively. Dividends paid on the unallocated shares are used to fund the loan payment. The Corporation recorded expense related to the ESOP of approximately $138,000, $111,000, and $380,000 for the years ended December 31, 2015, 2014, and 2013, respectively. The fair value of the unearned ESOP shares approximated $2.3 million at both December 31, 2015 and 2014, respectively. In 2005, the Corporation initiated a Management Recognition Plan (“MRP” or the “Plan”) which provided for awards of 166,607 shares to members of the board of directors, management and certain employees. Common shares awarded under the MRP vest over a five or seven year period, commencing with the date of the grant. Expense recognized under the MRP totaled $30,000, $25,000, and $37,000 for the years ended December 31, 2015, 2014, and 2013, respectively. During the year ended December 31, 2015, 11,554 were awarded under the Corporation’s MRP, respectively at a weighted grant price of $14.58. At December 31, 2015 and 2014 total non-vested shares were 13,130 and 3,274 at a weighted average grant date fair value of $13.93 and $9.38. The shares in the plan and the shares granted have been adjusted to reflect the exchange ratio of 0.857-to-one. The 2013 Equity Incentive Plan provides for 187,000 shares to be granted. As of December 31, 2015, 7,500 restricted stock shares have been granted under the 2013 Equity Incentive Plan. 11. Fair Value of Financial Instruments Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value, is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity or contracts that convey or impose on an entity the contractual right or obligation to either receive or deliver cash for another financial instrument. These fair value estimates are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price for which an asset could be sold or liability could be settled. However, given there is no active market or observable market transactions for many of the Corporation’s financial instruments, it has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments at December 31, 2015 and 2014:
Cash and cash equivalents
Investment and mortgage-backed securities
Loans receivable
Loans held for sale
Federal Home Loan Bank stock
Deposits
Advances from the Federal Home Loan Bank
Advances by Borrowers for Taxes and Insurance
Commitments to extend credit 12. Advertising Advertising costs are expensed when incurred. 13. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and interest-bearing deposits in other financial institutions with original terms to maturity of ninety days or less. The Corporation maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents. 14. Earnings Per Share Basic earnings per share is computed based upon the weighted-average common shares outstanding during the year less shares in the ESOP that are unallocated and not committed to be released. Weighted-average common shares deemed outstanding gives effect to a reduction for 149,600, 158,950, and 168,300 unallocated shares held by the ESOP for the fiscal years ended December 31, 2015, 2014, and 2013, respectively.
For the years ended
December 31,
2015 2014 2013
Weighted-average common shares outstanding (basic) 6,617,500 6,585,061 6,863,238
Dilutive effect of assumed exercise of stock options 101,606 29,997 5,972
Weighted-average common shares outstanding (diluted) 6,719,106 6,615,058 6,869,210 For the year ended December 31, 2015 options to purchase 544,168 shares of common stock ranging in price from $8.30 - $15.90 were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares. For the years ended December 31, 2014 and 2013 the options totaled 758,929 and 369,921 ranging in price from $8.30 to $15.90. 15. Stock Option Plan The Corporation established stock incentive plans that provide for grants of up to 884,018 stock options. During 2015, 189,070 stock options were granted in accordance with the 2005 and 2013 Equity Incentive Plans subject to a five year vesting period in which the options granted will vest ratably annually beginning one year from the date of grant. As of December 31, 2015, all option shares have been granted in accordance with the 2005 and 2013 Equity Incentive Plans. During 2014, 400,000 stock options were granted in accordance with the 2013 Equity Incentive Plan subject to a five year vesting period in which the options granted will vest ratably annually beginning one year from the date of grant. The shares in the plan and shares granted prior to the second step conversion have been adjusted to reflect the exchange ratio of 0.857 for the second step conversion that occurred in 2012. The Corporation follows Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 718 (ASC 718), “Compensation – Stock Compensation,” for its stock option plans, and accordingly, the Corporation recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options is reflected as a net increase in equity, for both any new grants, as well as for all unvested options outstanding, in both cases using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option. The compensation cost recorded for unvested equity-based awards is based on their grant-date fair value. For the year ended December 31, 2015, the Corporation recorded $180,000 of compensation cost for equity-based awards that vested. The Corporation has $665,000 unrecognized compensation cost related to non-vested equity-based awards granted under its stock incentive plan as of December 31, 2015, which is expected to be recognized over a weighted-average vesting period of approximately 3.9 years. A summary of the unvested stock awards is as follows:
Weighted Average Fair Value
Shares on Award Date
Unvested at December 31, 2013 10,841 $ 3.29
Awarded 400,000 1.56
Forfeited - -
Vested (4,694 ) 3.67
Unvested at December 31, 2014 406,147 $ 1.58
Weighted Average Fair Value
Shares on Award Date
Unvested at December 31, 2014 406,147 $ 1.58
Awarded 189,070 2.05
Forfeited (75,000 ) 1.56
Vested (88,313 ) 3.67
Unvested at December 31, 2015 431,904 $ 1.78 A summary of the status of the Corporation’s stock option plan as of December 31, 2015, 2014, and 2013 and changes during the year then ended is presented below:
2015 2014 2013
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
Outstanding at beginning of year 758,929 $ 12.67 369,921 $ 12.80 370,321 $ 12.80
Granted 189,070 14.96 400,000 12.48 - -
Exercised (328,831 ) 13.01 (10,992 ) 9.94 - -
Forfeited (75,000 ) 12.48 - - (400 ) 8.30
Outstanding at end of year 544,168 $ 13.29 758,929 $ 12.67 369,921 $ 12.80
Options exercisable at year-end 112,264 $ 12.32 352,781 $ 12.86 359,177 $ 12.91
Fair value of options granted during the year $ 2.05 $ 1.56 N/A
Weighted average remaining vesting period 3.9 years 4.4 years 1 month
The following information applies to options outstanding at December 31, 2015:
Number outstanding 544,168
Exercise price $ 8.30 - $15.90
Weighted-average exercise price 13.29
Weighted-average remaining contractual life 8.6 years
The following information applies to options outstanding at December 31, 2014:
Number outstanding 758,929
Exercise price $ 8.30 - $15.90
Weighted-average exercise price 12.67
Weighted-average remaining contractual life 5.4 years
The following information applies to options outstanding at December 31, 2013:
Number outstanding 369,921
Exercise price $ 8.30 - $15.90
Weighted-average exercise price 12.80
Weighted-average remaining contractual life 1.9 years The expected term of options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based upon the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based upon the historical volatility of the Corporation’s stock. The fair value of each option granted is estimated on the date of grant using the modified Black-Scholes options-pricing model with the following weighted-average assumptions used for the July 7, 2015, May 4, 2015 and July 15, 2014 grants: dividend yield of 2.70%, 2.33% and 2.88%; expected volatility of 15.09%, 15.56% and 14.25%; risk-free interest rates of 2.27%, 2.16% and 2.55%; and expected lives of 10 years. There were no grants during the year ended December 31, 2013. 16. Disclosures about Fair Value of Assets and Liabilities The estimated fair values of the Company’s financial instruments are as follows:
2015 2014
Carrying Fair Carrying Fair
value value value value
(In thousands)
Financial assets
Cash and cash equivalents $ 43,005 $ 43,005 $ 42,439 $ 42,439
Investment securities 91,220 91,220 126,999 126,999
Mortgage-backed securities 7,503 7,503 9,400 9,400
Loans receivable – net and loans held for sale 376,171 387,103 337,095 358,500
Accrued interest receivable 1,670 1,670 1,801 1,801
Federal Home Loan Bank stock 8,651 8,651 8,651 8,651
$ 528,220 $ 539,152 $ 526,385 $ 547,790
Financial liabilities
Deposits $ 454,885 $ 454,483 $ 451,784 $ 451,165
Advances from the Federal Home Loan Bank 12,578 12,178 14,851 15,726
Accrued interest payable 50 50 58 58
Advances by borrowers for taxes and insurance 2,494 2,494 2,651 2,651
$ 470,007 $ 469,205 $ 469,344 $ 469,600 Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists for fair value measurements based upon the inputs to the valuation of an asset or liability.
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Fair value methods and assumptions are set forth below for each type of financial instrument. Securities available for sale: Fair value on available for sale securities was based upon a market approach. Securities which are fixed income instruments that are not quoted on an exchange, but are traded in active markets, are valued using prices obtained from our custodian, which used third party data service providers and classified as level 2 assets. Management compares the fair values to another third party report for reasonableness. Available for sale securities includes U.S. agency securities, municipal bonds and mortgage-backed agency securities. Fair value measurements for certain assets and liabilities recognized in the accompanying statements of financial condition and measured at fair value on a recurring basis:
Quoted prices
in active Significant Significant
markets for other other
identical observable unobservable
assets inputs inputs
Total (Level 1) (Level 2) (Level 3)
(In thousands)
Securities available for sale at December 31, 2015:
U.S. Government agency securities $ 89,906 - $ 89,906 -
Municipal obligations 1,314 - 1,314 -
Mortgage-backed securities 7,503 - 7,503 -
Securities available for sale at December 31, 2014:
U.S. Government agency securities $ 125,223 - $ 125,223 -
Municipal obligations 1,776 - 1,776 -
Mortgage-backed securities 9,400 - 9,400 - Fair value measurements for certain assets and liabilities recognized in the accompanying statements of financial condition and measured at fair value on a nonrecurring basis:
Quoted prices
in active Significant Significant
markets for other other
identical observable unobservable
assets inputs inputs
Total (Level 1) (Level 2) (Level 3)
(In thousands)
December 31, 2015:
Real estate acquired through foreclosure $ 1,633 - $ 1,633 -
Loans held for sale 1,897 - 1,897 -
Impaired loans 14,395 - 14,395 -
December 31, 2014:
Real estate acquired through foreclosure $ 1,815 - $ 1,815 -
Loans held for sale 1,332 - 1,332 -
Impaired loans 15,382 - 15,382 - The following table presents fair value measurements for the Company’s financial instruments which are not recognized at fair value in the accompanying statements of financial position on a recurring or nonrecurring basis.
Total Quoted prices Significant Significant
December 31, 2015:
Financial assets:
Cash and cash equivalents $ 43,005 $ 43,005 $ - $ -
Mortgage-backed securities - - - -
Loans receivable - net 387,103 - 387,103 -
Federal Home Loan Bank stock 8,651 - 8,651 -
Accrued interest receivable 1,670 - 1,670 -
Financial liabilities:
Deposits 454,483 - 454,483 -
Advances from the Federal Home Loan Bank 12,178 - 12,178 -
Advances by borrowers for taxes and insurance 2,494 - 2,494 -
Accrued interest payable 50 - 50 -
December 31, 2014:
Financial assets:
Cash and cash equivalents $ 42,439 $ 42,439 $ - $ -
Mortgage-backed securities - - - -
Loans receivable - net 358,500 - 358,500 -
Federal Home Loan Bank stock 8,651 - 8,651 -
Accrued interest receivable 1,801 - 1,801 -
Financial liabilities:
Deposits 451,165 - 451,165 -
Advances from the Federal Home Loan Bank 15,726 - 15,726 -
Advances by borrowers for taxes and insurance 2,651 - 2,651 -
Accrued interest payable 58 - 58 - 17. Effects of Recent Accounting Pronouncements We adopted the following accounting guidance in 2015, none of which had a material effect, if any, on our consolidated financial position or results of operations. In August 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update defer the effective date of Update 2014-09 for all entities by one year. Public companies should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 31, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In January 2016, FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10). The amendments in this update affect all entities that hold financial assets or owe financial liabilities. The update’s main provisions applicable to the Company are as follows: 1) Require equity investments with readily available fair values (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; 4) Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 5) Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and 6) Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. Public companies should apply the guidance in Update 2016-01 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is generally not permitted. An entity should apply the |
