SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
68
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued ASU 2013-02,
Comprehensive Income (Topic 220) which amended existing guidance related to reporting amounts
reclassified out of accumulated other comprehensive income. These amendments do not change the
current requirements for reporting net income or other comprehensive income in financial statements.
These amendments require an entity to provide information about the amounts reclassified out of
accumulated other comprehensive income, by component. In addition, an entity is required to present,
either on the face of the statement where net income is presented on in the notes, significant amounts
reclassified out of accumulated other comprehensive income by the respective line items of net income but
only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety
in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified
in their entirety to net income, an entity is required to cross-reference to other disclosures required under
U.S. GAAP that provide additional details about those amounts. For public entities, this update became
effective prospectively for reporting periods beginning after December 15, 2012. We adopted ASU 2013-
2 commencing with our report on Form 10-Q filed for the first quarter of 2013.
In January 2014, the FASB issued ASU 2014-01, Investments—Equity Method and Joint Ventures (Topic
323): Accounting for Investments in Qualified Affordable Housing Projects, to provide additional
flexibility with regard to accounting for investments in qualified affordable housing projects. ASU 2014-
01 modifies the conditions that must be met to present the pretax impact and related tax benefits of such
investments as a component of income taxes (“net” within income tax expense), to enable more investors
to elect to use a “net” presentation for those investments. Investors that do not qualify for “net”
presentation under the new guidance will continue to account for such investments under the equity
method or cost method, which results in losses recognized in pretax income and tax benefits recognized in
income taxes (“gross” presentation of investment results). For investments that qualify for the “net”
presentation of investment performance, ASU 2014-01 introduces a “proportional amortization method”
that can be elected to amortize the investment basis. If elected, the method is required for all eligible
investments in qualified affordable housing projects. ASU 2014-01 also requires enhanced recurring
disclosures for all investments in qualified affordable housing projects, regardless of the accounting
method used for those investments. It is effective for interim and annual periods beginning after
December 15, 2014, and early adoption is permitted. The Company currently expects to adopt ASU 2014-
01 as of the first quarter of 2015. We will likely continue to account for our low-income housing tax
credit investments using the equity method subsequent to our adoption of ASU 2014-01 and thus do not
expect any impact on our income statement or balance sheet, but our disclosures with regard to low-
income housing tax credit investments will be updated to reflect the new requirements.
In January 2014, the FASB issued ASU 2014-04, Receivables—Troubled Debt Restructurings by
Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer
Mortgage Loans upon Foreclosure, to resolve diversity in practice with respect to a creditor’s
reclassification of a collateralized consumer mortgage loan to other real estate owned (OREO). Current
US GAAP requires a loan to be reclassified to OREO upon a troubled debt restructuring that is “in
substance a repossession or foreclosure”, where the creditor receives “physical possession” of the debtor's
assets regardless of whether formal foreclosure proceedings take place. The terms “in substance a
repossession or foreclosure” and “physical possession” are not defined in US GAAP; therefore, questions
have arisen about when a creditor should reclassify a collateralized mortgage loan to OREO. ASU 2014-
04 requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon
obtaining legal title to the real estate collateral, or when the borrower voluntarily conveys all interest in
the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar
legal agreement. ASU 2014-04 is effective for public business entities for interim and annual periods
beginning after December 15, 2014. It will be adopted by the Company for the first quarter of 2015, and
we do not expect any impact upon our financial statements or operations upon adoption.
