Recent accounting pronouncements not yet adopted

The following recent accounting pronouncements are relevant to Gates’ operations but have not yet been adopted.


•	ASU 2016-02 “Leases” (Topic 842)


•	ASU 2018-10 “Leases” (Topic 842): Codification Improvements to Topic 842, Leases


•	ASU 2018-11 “Leases” (Topic 842): Targeted Improvements

In February 2016, the FASB issued an ASU which introduces a lessee model that will bring most leases of property, plant and equipment onto the balance sheet. It requires a lessee to recognize a lease obligation (present value of future lease payments) and also a “right of use asset” for all leases, although certain short-term leases are exempted from the standard. The ASU introduces two models for the subsequent measurement of the lease asset and liability, depending on whether the lease qualifies as a “finance lease” or an “operating lease”. This distinction focuses on whether or not effective control of the asset is being transferred from the lessor to the lessee.

The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The impact on our consolidated financial statements of adopting this ASU, which will affect the recognition, measurement and presentation of leases, is expected to be material given the number and value of leases held. We are gathering and analyzing all relevant lease data and are continuing to evaluate the impact of the ASU.

In July 2018, the FASB issued ASU 2018-11, which allows entities an additional, optional transition method. Previously, Topic 842 was required to be adopted on a modified retrospective basis; however, entities now have the option of initially applying the new leases standard at the adoption date and recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with comparative periods continuing to be presented in accordance with current GAAP (Topic 840, Leases). We currently anticipate adopting Topic 842 using this optional transition method.


•	ASU 2016-13 “Financial Instruments” (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued an ASU which broadens the information that an entity must consider when developing its expected credit loss estimate for financial assets. The financial asset must be measured at the net amount expected to be collected.

The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The impact on our consolidated financial statements of adopting this ASU, which may affect the recognition, measurement and presentation of financial assets, is still being evaluated.


•	ASU 2018-02 “Income Statement – Reporting Comprehensive Income” (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued an ASU to address concerns about the guidance in current U.S. GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. This concern stemmed from the U.S. federal government’s enactment of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” known as the Tax Cuts and Jobs Act (the “Tax Act”), on December 22, 2017. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act.

The amendments are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the amendments should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The impact on our consolidated financial statements of adopting this ASU, which may affect the recognition, measurement and presentation of taxes, is still being evaluated.


•	ASU 2018-13 “Fair Value Measurement” (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued an ASU to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the consideration of costs and benefits. The amendments remove certain disclosures, clarify other disclosure requirements, and add new disclosure requirements that have been identified as relevant.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Most of the amendments should be applied retrospectively to all periods presented, but a few amendments should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. Early adoption is permitted and an entity is permitted to early adopt any removed or modified disclosures upon issuance of the Update and delay adoption of the additional disclosures until their effective date. The impact on our consolidated financial statements of adopting this ASU, which will affect our fair value disclosures, is still being evaluated.


•	ASU 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General” (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued an ASU to modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments remove certain disclosures, clarify other disclosure requirements, and add new disclosure requirements that have been identified as relevant.

The amendments are effective for fiscal years ending after December 15, 2020, and should be applied on a retrospective basis to all periods presented. The impact on our consolidated financial statements of adopting this ASU, which will affect our disclosures, is still being evaluated.


•	ASU 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software” (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued an ASU to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement). The guidance permits capitalization of costs associated with the implementation of cloud-based software arrangements and aligns the criteria for capitalization with those for purchased or internally-generated computer software intangible assets. Implementation costs meeting the criteria for capitalization would not be classified as intangible assets but would instead be classified as prepaid expenses that are then amortized over the period of the arrangement as an additional expense consistent with the ongoing costs under the cloud computing arrangement.

The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted and entities may choose to apply the requirements either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The impact on our consolidated financial statements of adopting this ASU, which may affect the recognition, measurement and presentation of cloud computing software arrangements, is still being evaluated.