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New accounting pronouncements (Policies) | 3 Months Ended
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Mar. 31, 2019
Accounting Policies |
New accounting pronouncements policies | R ecently Adopted Accounting Standards Updates FASB Accounting Standards Updates (“ASUs”), Leases (Topic 842) The FASB has issued a series of ASUs which, among other things, supersede ASC Topic 840 and set out the principles for the recognition, measurement, presentation and disclosure of leases for both lessors and lessees. The new guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset (“ROU asset”) and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In addition, the new leases standa rd requires lessors, among other things, to present lessor costs paid by the lessee to the lessor on a gross basis. The Corporation adopted the new leases standard during the first quarter of 2019 using the modified retrospective approach. The Corporation elected the practical expedients to not reassess at the date of adoption whether any existing contracts were or contained leases, their lease classification, and initial direct costs. The Corporation also elected the optional transition method that allows application of the transition provisions of the new leases standard at the adoption date, instead of at the earliest comparative period presented. Therefore, comparative periods will continue to be presented in accordance with ASC Topic 840. The Corporatio n also elected the optional practical expedients that permit the use of hindsight in evaluating lessee options to extend or terminate a lease, and to not apply ASC Topic 842 to all classes of short-term leases. On the other hand, the Corporation did not el ect the practical expedient on not separating lease components from nonlease components. As of January 1, 2019, the Corporation recognized ROU assets of $139 million, net of deferred rent liability of $15 million and lease liabilities of $154 million on i ts operating leases. In addition, the Corporation recorded a positive cumulative effect adjustment of $4.8 million to retained earnings as a result of the reclassification of previously deferred gains on sale and operating lease back transactions. In ad dition, the Corporation early adopted ASU 201 9-01 which, among other things, reinstates the specific fair value guidance in ASC Topic 840 for lessors that are not manufacturers or dealers to continue to measure the fair value of an underlying asset at its cost and clarifies that lessors that are depository or lending institutions in the scope of ASC Topic 942 are required to present the principal portion of lessee payments received from sales-type or direct financing leases as cash flows from investing acti vities. The Corporation was not impacted by the adoption of ASU 2019-01. FA SB Accounting Standards Update (“ASU”) 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes The FASB issued ASU 2018-16 in October 2018 which permits use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to other permiss ible U.S. benchmark rates. The Corporation adopted ASU 2018-16 during the first quarter of 2019. As such, the Corporation will consider this guidance for qualifying new hedging relationships entered into on or after the effective date. FASB Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income The FASB issued ASU 2018-02 in February 2018, which allow s a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. These stranded tax effects result from recognizing in income the impact of changes in tax rates even whe n the related tax effects were recognized in accumulated other comprehensive income. The amendments also require certain disclosures about stranded tax effects. The Corporation adopted ASU 2018-02 during the first quarter of 2019. As of December 31, 2018, the Corporation maintained a full valuation allowance on the deferre d tax assets, which were recognized in accumulated other comprehensive income related to its U.S. operations. As such, the Corporation was not impacted by the adoption of this accounting pronouncement during the first quarter of 2019. FASB Accounting Stan dards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities The FASB issued ASU 2017-12 in August 2017, which makes more financial and nonfinancial hedging strategies eligible for hedge accounting and changes how companies assess effectiveness by, among other things, eliminating the requirement for entities to recognize hedge ineffectiveness each reporting period for cash flow hedges and requiring presentation of the changes in fair value of cash flow hedges in the same income statement line item(s) as the earnings effect of the hedged items when the hedged item affects earnings. The Corporation adopted ASU 201 7-1 2 during the first quarter of 2019. The cumulative effect adjustment r ecorded to retained earnings to reverse the hedge ineffectiveness as of December 31, 2018 was not significant. There were no changes in presentation since the earnings effect of the hedges and the hedged items are already presented in the same income state ment line item. In addition, the Corporation elected to continue to perform subsequent assessments of hedge effectiveness quantitatively. Additionally, adoption of the following standards effective during the first quarter of 201 9 did not have a significant impact on the Corporation’s C onsolidated F inancial S tatements: F ASB Accounting Standards Update (“ASU”) 2018-09, Codification Improvements F ASB Accounting Standards Update (“ASU”) 2018-0 7, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting FASB Accounting Standards Update (“ASU”) 201 7-1 1, Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): Part I: Accounting for Certain Financial Instruments with Down Round Features; Part II: Replacement of the Indefinite Deferral for Mand atorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception F ASB Accounting Standards Update (“ASU”) 2017-08, Receivables– Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities R ecently Issued Accounting Standards Updates FA SB Accounting Standards Update (“ASU”) 201 9-04, Codification Improvements to Topic 326, Financial Instruments– Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments The FASB issued ASU 201 9-04 in April 2019, which clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). Amendments to Topic 326 are mainly in the areas o f accrued interest receivable, transfers of loans and debt securities between classifications, inclusion of expected recoveries in the allowance for credit losses, and permitting a prepay-adjusted effective interest rate except for TDRs. Amendments to Topi c 815 and Topic 825 are mainly in the areas of fair value hedges and equity securities accounted for under the measurement alternative, respectively. The amendments of this Update are effective for fiscal years, and interim periods within those fiscal yea rs, beginning after December 1 5, 20 19. The Corporation is currently evaluating the impact that the amendments to Topic 326 will have on the CECL implementation. Nonetheless, the Corporation does not anticipate that the amendments to Topic 815 and Topic 82 5 will have a material effect on its Consolidated Financial Statements. For other recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial S tatements included in the 201 8 Form 10-K.

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