SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts
with Customers (Topic 606). This ASU is the result of a joint project initiated by the FASB and the
International Accounting Standards Board (IASB) to clarify the principles for recognizing revenue, and to
develop a common revenue standard and disclosures for U.S. and international accounting standards that
would: (1) remove inconsistencies and weaknesses in revenue requirements; (2) provide a more robust
framework for addressing revenue issues; (3) improve comparability of revenue recognition practices
across entities, industries, jurisdictions, and capital markets; (4) provide more useful information to users
of financial statements through improved disclosure requirements; and (5) simplify the preparation of
financial statements by reducing the number of requirements to which an entity must refer. The guidance
affects any entity that either enters into contracts with customers to transfer goods or services or enters
into contracts for the transfer of nonfinancial assets. The core principle is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The
guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient
information to enable users of financial statements to understand the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative
information is required with regard to contracts with customers, significant judgments and changes in
judgments, and assets recognized from the costs to obtain or fulfill a contract. This ASU is effective for
annual reporting periods beginning after December 15, 2016, including interim periods within that
reporting period. Early application is not permitted. The Company is currently evaluating the potential
effects of this guidance on its financial statements and disclosures.
In June 2014, the FASB issued ASU 2014-12 which amended existing guidance related to the accounting
for share-based payments when the terms of an award provide that a performance target could be achieved
after the requisite service period. These amendments require that a performance target that affects vesting
and that could be achieved after the requisite service period be treated as a performance condition. A
reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it
relates to awards with performance conditions that affect vesting to account for such awards. The total
amount of compensation cost recognized during and after the requisite service period should reflect the
number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately
vest. The requisite period ends when the employee can cease rendering service and still be eligible to vest
in the award if the performance target is achieved. ASU 2014-12 is effective for annual periods and
interim periods within those annual periods beginning after December 15, 2015. It will be adopted by the
Company for the first quarter of 2016, and we do not expect any impact upon our financial statements or
operations upon adoption.
In August 2014, the FASB issued ASU 2014-14 which amended existing guidance related to the
classification of certain government-guaranteed mortgage loans, including those guaranteed by the FHA
and the VA, upon foreclosure. It requires that a mortgage loan be derecognized and a separate other
receivable be recognized upon foreclosure if the following conditions are met: 1) The loan has a
government guarantee that is not separable from the loan before foreclosure; 2) At the time of foreclosure,
the creditor has the intent to convey the real estate property to the guarantor and make a claim on the
guarantee, and the creditor has the ability to recover under that claim; and 3) At the time of foreclosure,
any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon
foreclosure, the separate other receivable should be measured based on the amount of the loan balance
(principal and interest) expected to be recovered from the guarantor. ASU 2014-14 is effective for annual
periods and interim periods within those 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.
