Note 12 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

12. Recent Accounting Pronouncements

Newly Issued

Not

Yet Effective Accounting Standards

In

June 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2016

-

13,

“Financial Instruments - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments”. ASU

2016

-

13

significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial instruments. The main provisions of the guidance include (

1

) replacing the “incurred loss” approach under current GAAP with an “expected loss” model for instruments measured at amortized cost, (

2

) requiring entities to record an allowance for available-for-sale debt securities rather than reduce the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (

3

) a simplified accounting model for purchased credit-impaired debt securities and loans. The ASU is effective for interim and annual reporting periods beginning after

December 15, 2019,

although early adoption is permitted. However, on

October 16, 2019,

FASB announced a delay for the effective date of this ASU for smaller reporting companies until fiscal years beginning after

December 15, 2022. 

As the Corporation is a smaller reporting company, the delay would be applicable.  Management has selected a software vendor and is currently working through the implementation process.  The Corporation is reviewing available historical information in order to assess the expected credit losses and determine the impact the adoption of ASU

2016

-

13

will have on the financial statements.

In

August 2018,

the FASB issued ASU

2018

-

14,

"Compensation - Retirement Benefits - Defined Benefit Plans".  ASU

2018

-

14

removes disclosures pertaining to (a) the amounts of AOCI expected to be recognized as pension costs over the next fiscal year, (b) the amount and timing of plan assets expected to be returned to the employer, and (c) the effect of

one

-percentage-point change in the assumed health care trends on (i) service and interest costs and (ii) post-retirement health care benefit obligation.  A disclosure will be added requiring an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.  The amendments in this update are effective retrospectively for annual periods and interim periods within those annual periods beginning after

December 15, 2020. 

Early adoption is permitted.  The Corporation does

not

expect ASU

2018

-

14

to have a material impact on its financial statements and disclosures.

In

December 2019,

the FASB issued ASU

2019

-

12,

"Income Taxes - Simplifying the Accounting for Income Taxes".  ASU

2019

-

12

is effective for fiscal years beginning after

December 15, 2020,

with early adoption permitted.  Certain provisions under ASU

2019

-

12

require prospective application, some require modified retrospective adoption, while other provisions require retrospective application to all periods presented in the consolidated financial statements upon adoption.  The Corporation is currently evaluating the effect that this ASU will have on its financial statements and disclosures.

In

March 2020,

the FASB issued ASU

2020

-

04,

"Facilitation of the Effects of Reference Rate Reform on Financial Reporting".  The ASU is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR, or other reference rates that

may

be discontinued, and provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria.  The ASU also provides for a

one

-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before

January 1, 2020. 

ASU

2020

-

04

is effective

March 12, 2020

through

December 31, 2022. 

The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the

one

-time election to sell and/or transfer debt securities classified as HTM

may

be made any time after

March 12, 2020. 

The Corporation does

not

expect ASU

2020

-

04

to have a material impact on its financial statements and disclosures.  

Adoption of New Accounting Policies

In

January 2017,

FASB ASU

2017

-

04,

"Simplifying the Test for Goodwill Impairment". This ASU simplifies the measurement of goodwill by eliminating Step

2

from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should

not

exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the

first

interim and annual reporting periods beginning after

December 15, 2019.

Early adoption was permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Corporation has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than

not

reduce the fair value of the reporting unit below its carrying value. In conjunction with most recent annual impairment assessment as of

November 30, 2019,

the Corporation adopted the simplified measurement of goodwill.  Although the Corporation cannot anticipate future goodwill impairment assessments, based on the most recent assessment, the adoption of this guidance had

no

impact on consolidated financial statements.

In

August 2018,

the FASB issued ASU

2018

-

13,

"Fair Value Measurement".  ASU

2018

-

13

eliminates, adds and modifies certain disclosure requirements for fair value measurements.  Disclosures for transfers between Level

1

and Level

2,

the policy for timing of transfers between levels, and the valuation processes for Level

3

fair value measurement will be removed.  Additional disclosures will be required relating to (a) changes in unrealized gains/losses in OCI for Level

3

fair value measurements for assets held at the end of the reporting period, and (b) the process of calculating weighted average for significant unobservable inputs used to develop Level

3

fair value measurements.  The amendments in this update became effective for annual periods and interim periods within those annual periods beginning after

December 15, 2019. 

The adoption of this ASU did

not

have a material impact on the Corporation's financial statements and disclosures.

In

March 2020,

in accordance with provisions in the CARES Act, the Corporation has elected

not

to apply the guidance in ASC

310

-

40

on accounting for TDRs to loan modifications related to COVID-

19

made between

March 1, 2020

and the earlier of (

1

)

December 31, 2020

or (

2

)

60

days after the end of the COVID-

19

national emergency.  This relief was only applied to modifications for borrowers that were

not

more than

30

days past due as of

December 31, 2019

and

may

include payment deferrals, fee waivers, extension of repayments or other delays in payment.