Recent Accounting Guidance

12 Months Ended

Jun. 30, 2020

Recent Accounting Guidance

Recent Accounting Guidance

2.Recent Accounting Guidance

Recently Issued and Adopted Accounting Guidance

In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01 (“ASU 2016-01”),Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, as amended by ASU No. 2018-03, Financial Instruments-Overall: Technical Corrections and Improvements, issued in February 2018, on the recognition and measurement of financial instruments.  The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments.  Additionally, there is no longer a requirement to assess equity securities for impairment since such securities are now measured at fair value through net income.  We utilized a modified retrospective approach to adopt the new guidance effective July 1, 2018.  The impact related to the change in accounting for equity securities for our fiscal year ended June 30, 2018 was $0.3 million of net unrealized investment gains, net of income tax, reclassified from AOCI to retained earnings.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), on the recognition of lease assets and lease liabilities on the balance sheet.  The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The new guidance changes the current accounting guidance related to the recognition of lease assets and lease liabilities.  We early adopted the new guidance effective June 30, 2019, as further disclosed in Note 16 to these financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220) (“ASU 2018-02”), which permits entities to reclassify the tax effects stranded in accumulated other comprehensive income as a result of recent United States federal tax reforms to retained earnings.  The guidance also requires entities to disclose their accounting policies with regards to the treatment of stranded tax effects not related to the Tax Cuts and Jobs Act. It allows entities to elect either a “security-by-security” approach or a “portfolio approach” to recognize the stranded tax effects from a valuation allowance release.  Under the security-by-security approach, an entity will recognize the stranded tax effects associated with individual securities as it disposes of each security.  Under the portfolio approach, an entity will recognize the stranded tax effects associated with a portfolio of securities when it has disposed of all securities within that portfolio.  Entities can elect to apply the guidance retrospectively or in the period of adoption.  This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods therein, with early adoption permitted.  We adopted the new guidance effective July 1, 2019 with no material impact on our consolidated financial statements or disclosures.  We elected the portfolio approach to recognize the stranded tax effects from our valuation allowance release.

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”).  ASU 2020-03 provides changes to clarify or improve existing guidance.  This guidance is effective upon issuance.  We adopted the new guidance effective March 31, 2020 with no impact on our consolidated financial statements or disclosures.

Recent Accounting Guidance Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”). ASU No. 2018-13 is part of the disclosure framework project and eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements.  The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted.  We are currently evaluating the impact this change will have on our consolidated financial statements and disclosures.

In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”).  Among other things, ASU 2019-10 provides that ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) will be effective for Public Business Entities that are SEC filers, excluding smaller reporting companies such as the Company, for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  For all other entities, including smaller reporting companies like the Company, ASU 2016-13 will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.  For all entities, early adoption will continue to be permitted.  We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”).  ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance.  This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.  We are currently evaluating the impact that ASU 2019-12 will have on our consolidated financial statements and disclosures.