| Recent Accounting Standards [Text Block] |
Note 3: Recent Accounting Standards
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ACCOUNTING STANDARDS ADOPTED |
Standard/Description |
Effective Date and Adoption Considerations |
Effect on Financial Statements or Other Significant Matters |
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Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment. This accounting standard update eliminates Step 2 from the existing guidance to simplify how goodwill impairment tests are performed. With the elimination of this step, a goodwill impairment test is performed by comparing the fair value of a reporting unit to its carrying value. An impairment charge is recognized for the amount by which the reporting unit's carrying value exceeds its fair value.
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We elected to early adopt this accounting standard update in the second quarter of 2017 on a prospective basis.
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We expect the adoption of this update to simplify our annual goodwill impairment testing process, by eliminating the need to estimate the implied fair value of a reporting unit’s goodwill, if its respective carrying value exceeds fair value.
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ACCOUNTING STANDARDS NOT YET ADOPTED |
Standard/Description |
Effective Date and Adoption Considerations |
Effect on Financial Statements or Other Significant Matters |
Revenue Recognition - Contracts with Customers. This standard was issued to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by all companies. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
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Effective in the first quarter of 2018.
We plan to adopt the standard retrospectively with the cumulative effect of initially applying it recognized at the date of initial application ("modified retrospective" approach).
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Our assessment has identified a change in revenue recognition timing on our component sales made to distributors. We expect to recognize revenue when we deliver to the distributor rather than deferring recognition until the distributor sells the components.
On the date of initial application, we will remove the deferred income and related receivables on component sales made to distributors through a cumulative adjustment to retained earnings. We expect the revenue deferral, historically recognized in the following period, to be offset by the acceleration of revenue recognition as control of the product transfers to our customer.
Our assessment has also identified a change in expense recognition timing related to payments we make to our customers for distinct services they perform as part of cooperative advertising programs, which were previously recorded as operating expenses. We expect to recognize the expense for cooperative advertising in the period the marketing activities occur. We currently recognize the expense in the period the customer is entitled to participate in the program, which coincides with the period of sale. On the date of initial adoption, we will capitalize the expense of cooperative advertising not performed through a cumulative adjustment to retained earnings.
We have completed our assessment and implemented policies, processes, and controls to support the standards measurement and disclosure requirements. Refer to the table below, which summarizes the anticipated impacts of the changes discussed above to Intel's financial statements. This will be an adjustment to opening balances for the fiscal year beginning December 31, 2017.
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Financial Instruments - Recognition and Measurement. Requires changes to the accounting for financial instruments that primarily affect equity investments, financial liabilities measured using the fair value option, and the presentation and disclosure requirements for such instruments.
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Effective in the first quarter of 2018.
Changes to our marketable equity securities are required to be adopted using a modified retrospective approach through a cumulative effect adjustment to retained earnings for the fiscal year beginning December 31, 2017.
Since management has elected to apply the measurement alternative to non-marketable equity securities, changes to these securities are being adopted prospectively.
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Marketable equity securities previously classified as available-for-sale equity investments will be measured and recorded at fair value with changes in fair value recorded through the income statement.
All non-marketable equity securities formerly classified as cost method investments will be measured and recorded using the measurement alternative upon adoption. Equity securities measured and recorded using the measurement alternative are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. Adjustments resulting from impairments and observable price changes will be recorded in the income statement.
Beginning in the first quarter of 2018, in accordance with the standard, fair value disclosures will no longer be provided for equity securities measured using the measurement alternative. In addition, the existing impairment model will be replaced with a new one-step qualitative impairment model. No initial adoption adjustment will be recorded for these instruments since the standard is required to be applied prospectively for securities measured using the measurement alternative.
We have completed our assessment and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. Refer to the table below, which summarizes the anticipated impacts, net of tax, of the changes discussed above to Intel's financial statements. This will be an adjustment to opening balances for the fiscal year beginning December 31, 2017.
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ACCOUNTING STANDARDS NOT YET ADOPTED |
Standard/Description |
Effective Date and Adoption Considerations |
Effect on Financial Statements or Other Significant Matters |
Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This amended standard was issued to provide additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets. The service cost component of the net periodic benefit cost will continue to be reported within operating income on the consolidated income statement. All other non-service components are required to be presented separately outside operating income, and only service costs will be eligible for inventory capitalization.
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Effective in the first quarter of 2018.
Changes to the presentation of benefit costs are required to be adopted retrospectively, while changes to the capitalization of service costs into inventories are required to be adopted prospectively. The standard permits, as a practical expedient, use of the amounts disclosed in the Retirement Benefit Plans footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation requirement.
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We expect the adoption of the amended standard to result in the reclassification of approximately $115 million from non-service components above the subtotal of operating income to interest and other, net, for the year ended December 30, 2017 ($260 million for the year ended December 31, 2016).
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Leases. This new lease accounting standard requires that we recognize leased assets and corresponding liabilities on the balance sheet and provide enhanced disclosure of lease activity.
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Effective in the first quarter of 2019.
We plan to adopt the new standard using a modified retrospective transition approach.
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We expect the valuation of our right-of-use assets and lease liabilities, previously described as operating leases, to approximate the present value of our forecasted future lease commitments. We are currently implementing process and system changes in order to comply with the measurement and disclosure requirements. |
The following table summarizes the effects of adopting Revenue Recognition - Contracts with Customers and Financial Instruments - Recognition and Measurement on our financial statements for the fiscal year beginning December 31, 2017 as an adjustment to the opening balance:
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Adjustments from |
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Fiscal Year Beginning
(In Millions)
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Dec 30, 2017 |
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Revenue Standard |
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Financial Instruments Update |
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Dec 31, 2017
As Adjusted
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Assets: |
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Accounts receivable, net |
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$ |
5,607 |
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$ |
(530 |
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$ |
— |
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$ |
5,077 |
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Inventories |
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$ |
6,983 |
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$ |
47 |
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$ |
— |
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$ |
7,030 |
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Other current assets |
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$ |
2,908 |
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$ |
64 |
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$ |
— |
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$ |
2,972 |
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Equity investments |
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$ |
— |
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$ |
— |
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$ |
8,579 |
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$ |
8,579 |
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Marketable equity securities |
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$ |
4,192 |
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$ |
— |
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$ |
(4,192 |
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$ |
— |
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Other long-term assets |
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$ |
7,602 |
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$ |
— |
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$ |
(4,387 |
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$ |
3,215 |
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Liabilities: |
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Accounts payable |
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$ |
2,928 |
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$ |
55 |
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$ |
— |
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$ |
2,983 |
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Deferred income |
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$ |
1,656 |
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$ |
(1,356 |
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$ |
— |
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$ |
300 |
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Other accrued liabilities |
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$ |
7,535 |
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$ |
26 |
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$ |
— |
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$ |
7,561 |
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Long-term deferred tax liabilities |
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$ |
3,046 |
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$ |
191 |
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$ |
— |
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$ |
3,237 |
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Stockholders' equity: |
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Accumulated other comprehensive income (loss) |
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$ |
862 |
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$ |
— |
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$ |
(1,745 |
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$ |
(883 |
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Retained earnings |
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$ |
42,083 |
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$ |
665 |
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$ |
1,745 |
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$ |
44,493 |
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