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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, 2017, 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 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures
.
This ASU aligns the accounting for repurchase-to-
maturity transactions and repurchase agreements executed as repurchase financings with the accounting for
other more typical repurchase agreements, by requiring that all of these transactions be accounted for as
secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and
supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase
financing could be accounted for on a combined basis as a forward agreement, which has resulted in off-
balance-sheet accounting. ASU 2014-11 requires a new disclosure for transactions economically similar to
repurchase agreements in which the transferor retains substantially all of the exposure to the economic return
on the transferred financial assets throughout the term of the transaction. It also requires expanded
disclosures about the nature of collateral pledged in repurchase agreements and similar transactions
accounted for as secured borrowings. ASU 2014-11 is effective for annual periods, and interim periods
within those annual periods, beginning after December 15, 2014. The Company has not entered into any
repurchase transactions in recent periods, and any such transactions executed by the Company in the future
will likely be typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements
executed as a repurchase financing) and will thus be accounted for as secured borrowings. As such, ASU
2014-11 did not have an impact on the Company’s consolidated financial statements upon adoption, and is
not expected to have any impact in future periods.
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.