The document summarizes key proposals from the FASB and IASB exposure drafts on revenue recognition. It discusses the core principle of recognizing revenue as control of goods or services is transferred to customers. It also outlines the five steps to apply the new standard: 1) identify contracts, 2) identify separate performance obligations, 3) determine transaction price, 4) allocate price to obligations, and 5) recognize revenue when obligations are satisfied. Government contractors will need to evaluate how these changes may affect their accounting and revenue recognition.
GT - Banking & Securities Update - Fall 2012Grant Thornton
Audit committees, management and boards of directors of banks and securities firms must keep pace with changing regulations, from the rules created under the Dodd-Frank Act to accounting pronouncements.
Grant Thornton’s Banking & Securities Update series provides brief, need-to-know overviews of the major accounting, regulatory and tax issues facing the industry.
The Fall 2012 issue covers topics including:
•FASB’s proposed expanded liquidity risk and interest rate risk disclosures
•OCC’s updated guidance on common accounting issues for banks
•Dodd-Frank Act and JOBS Act implementation updates
•Amendments to SEC Rule 17a-5 and financial responsibility rules
•Basel III capital and liquidity requirements affecting broker dealers
Solution Manual Advanced Accounting Chapter 15 9th Edition by BakerSaskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
GT - Banking & Securities Update - Fall 2012Grant Thornton
Audit committees, management and boards of directors of banks and securities firms must keep pace with changing regulations, from the rules created under the Dodd-Frank Act to accounting pronouncements.
Grant Thornton’s Banking & Securities Update series provides brief, need-to-know overviews of the major accounting, regulatory and tax issues facing the industry.
The Fall 2012 issue covers topics including:
•FASB’s proposed expanded liquidity risk and interest rate risk disclosures
•OCC’s updated guidance on common accounting issues for banks
•Dodd-Frank Act and JOBS Act implementation updates
•Amendments to SEC Rule 17a-5 and financial responsibility rules
•Basel III capital and liquidity requirements affecting broker dealers
Solution Manual Advanced Accounting Chapter 15 9th Edition by BakerSaskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
Smaller Reporting Companies vs. Emerging Growth Companies- The topic of reporting requirements and distinctions between various categories of reporting companies has been prevalent over the past couple of years as regulators and industry insiders examine changes to the reporting requirements for all companies, andqualifications for the various categories of scaled disclosure requirements. As I’ve
written about these developments, I have noticed inconsistencies in the treatment of smaller reporting companies and emerging growth companies in ways that are likely the result of poor drafting or unintended consequences...
GT - Financial reporting. Unravelling the future before the future unravels y...Grant Thornton
Key outputs from the International Accounting Standards Board’s major work programme are now appearing and more are on the way. 2013 will see major changes to international requirements on consolidated accounts, joint ventures and fair value disclosures. Big changes to international requirements are on the way for revenue recognition, financial instruments and leasing, which are expected to begin taking effect from 2015 onwards.
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 18Saskia Ahmad
Solution Manual Advanced Financial Accounting by Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker 9th Edition Chapter 18
On February 25, 2016, the FASB issued the new standard, Leases (ASC 842). There are elements of the new standard that could impact almost all entities to some extent, although lessees will likely see the most significant changes. Lessees will need to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability.
The IASB issued its new standard, IFRS 16, Leases, earlier this year. There are significant areas of divergence between guidance applicable under US GAAP and that required by IFRS.
An article Sia Partners NY produced on the regulatory impact of Volcker 2.0 to Banks. Thanks to my colleagues Chris Pearson and Stephen Perez for authoring this piece.
10 actions for facilities managers to improve job satisfactionMartin Leitch
Qualifications cost money and experience takes time, but these 10 low cost and timely actions will help facilities managers improve their job satisfaction
Smaller Reporting Companies vs. Emerging Growth Companies- The topic of reporting requirements and distinctions between various categories of reporting companies has been prevalent over the past couple of years as regulators and industry insiders examine changes to the reporting requirements for all companies, andqualifications for the various categories of scaled disclosure requirements. As I’ve
written about these developments, I have noticed inconsistencies in the treatment of smaller reporting companies and emerging growth companies in ways that are likely the result of poor drafting or unintended consequences...
GT - Financial reporting. Unravelling the future before the future unravels y...Grant Thornton
Key outputs from the International Accounting Standards Board’s major work programme are now appearing and more are on the way. 2013 will see major changes to international requirements on consolidated accounts, joint ventures and fair value disclosures. Big changes to international requirements are on the way for revenue recognition, financial instruments and leasing, which are expected to begin taking effect from 2015 onwards.
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 18Saskia Ahmad
Solution Manual Advanced Financial Accounting by Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker 9th Edition Chapter 18
On February 25, 2016, the FASB issued the new standard, Leases (ASC 842). There are elements of the new standard that could impact almost all entities to some extent, although lessees will likely see the most significant changes. Lessees will need to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability.
The IASB issued its new standard, IFRS 16, Leases, earlier this year. There are significant areas of divergence between guidance applicable under US GAAP and that required by IFRS.
An article Sia Partners NY produced on the regulatory impact of Volcker 2.0 to Banks. Thanks to my colleagues Chris Pearson and Stephen Perez for authoring this piece.
10 actions for facilities managers to improve job satisfactionMartin Leitch
Qualifications cost money and experience takes time, but these 10 low cost and timely actions will help facilities managers improve their job satisfaction
Andrea Aufieri - Il mercato dell'editoria oggi, un'inchiesta sui dati italianiAndrea Aufieri
Editori impuri, lettori difficili, lobby della carta, divario tecnologico e spese per la cultura che rasentano lo zero. L'informazione italiana è spacciata?
Amendments to Schedule III to the Companies Act, 2013Taxmann
With the coming financial year 2021-22, the companies and auditors have to deal with tons of new disclosure requirements while preparing and presenting financial statements and audit reports. There has been a wide range of implications on financial reporting that should be considered while preparing the financial Statements and one among these covers the recent amendments in Schedule III to the Companies Act, 2013. Let’s hear expert’s opinion on the changes and its nearest impact on the companies and the auditors.
A brief summary of recent news and publications from standard-setters on the topics of Accounting Standards for Private Enterprises (ASPE), Not-for-profit Organizations (NFPO) and Pension plans [December 17, 2012]
Haskell & White Taming The Tidal Wave 2010.08.25Meagan Hayes
1. The convergence of US GAAP and IFRS is driving standard setters to quickly develop numerous new accounting rules that are intended to converge and improve accounting and reporting.
2. You can expect new proposed standards addressing revenue recognition, lease accounting, financial statement presentation, loss contingencies, and fair value before the end of 2011 and that the new standards may be effective as early as 2012.
3. Because so many changes are forthcoming over a relatively short period of time, it is imperative that public companies remain current on the status of each project and the related required implementation dates so they can adequately assess the potential impact of any new requirements.
Follow up discussion response two paragraph Further the dialogue by .docxalfred4lewis58146
Follow up discussion response two paragraph Further the dialogue by providing more information and clarification two reference
Ford Motor Company reviews its statement and in many cases provides its quarterly report. The quarterly report helps executives, bankers, and investors to examine the financial statements of the company in detail. The quarterly comprehensive report that includes all of the company's financial information for the current year as well as previous years. The balance sheet is included in the report. The balance sheet is critical because it displays the company's assets, liabilities, and equity. It may show a two-year or longer comparison and detail revenue increases and decreases. The balance sheet is divided into three parts.
The assets, liabilities, and equities are all listed here. The organization's financial capability is shown in all three sections. The Ford Company's balance sheet detailed the divisions of assets, liabilities, and equity. When insolvency happens, the balance sheet may assist in identifying when debts are due. A balance sheet will help determine if a person's liabilities have surpassed their available assets. The aim of these sections is to draw the reader's attention to the current state of working capital and the current ratio. The ratios are important pieces of financial data because they display the organization's financial patterns.
The balance sheet is primarily used to assess a company's financial position. The balance sheet offers a brief snapshot of an organization's overall financial health as of a specific date. According to Ford's balance sheet, the total assets for their business are $259, 943 million. Ford has been financially secure and has healthy finance inside the group, while their overall liabilities are at comparing and updating the figures. $226,782 million, according to Ford's company's figures. The total assets are sufficient to cover the total liabilities. The balance sheet has been streamlined, and the common stock has increased slightly. Ford Motor Company used a strategy plan to keep working capital in place so that it could generate cash flow from its own operations.
This balance sheet, which analyses Ford's current financial condition, provides a snapshot of useful information on current cash flows in and out of the business. An enterprise can show signs of high net value and can also handle some financial problems. Any breakdowns for long-term liabilities and current liabilities that signal a financial issue should be closely examined in each group. Long-term refers to an asset that is liquid for a year.
Analyzing the balance sheet of Ford Motor Company from its annual 2020 report shows that its current assets, current liabilities, and equities have observed a positive trend over the year. By dividing the current asset by the current liabilities stated on the balance sheet, the ratio is a good current ratio. Ford's long-term solvency appears to be sufficient to .
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
Discussion QuestionComprehensive Income and the Income Stateme.docxlefrancoishazlett
Discussion Question:
"Comprehensive Income and the Income Statement"
Please respond to the following:
From the e-Activity, create one (1) argument to support the use of a two-step approach over the single-step approach when reporting comprehensive income. Support your response with specific examples that illustrate why the two-step approach is more beneficial than the single-step approach.
Differentiate between a multi-step income statement and a comprehensive income statement, and suggest which income statement is more useful to investors and creditors. Provide a rationale for your suggestion.
From e-Activity:
NEWS RELEASE 06/16/11
FASB Issues Accounting Standards Update to Improve Presentation of Comprehensive Income
Norwalk, CT, June 16, 2011—
The Financial Accounting Standards Board (FASB) today issued Accounting Standards Update (ASU) No. 2011-05
Comprehensive Income (Topic 220): Presentation of Comprehensive Income.
The Update is intended to increase the prominence of other comprehensive income in financial statements.
In US GAAP, the ASU will supersede some of the guidance in Topic 220 of the accounting Codification.
The main provisions of this Update provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements:
A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income.
In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.
The option in current GAAP that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated.
Leslie F. Seidman, chairman of the FASB, said: “We heard from investors there was a need to present other comprehensive income information more prominently in financial statements. This Update, which was developed jointly with the International Accounting Standards Board, responds to those investor needs, and will bring greater consistency and prominence to the reporting of other comprehensive income around the world.”
The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted, because compliance with the amendments is already permitted.
The Update, a “FASB In Focus” (a high-level summary of the proposal), and a podcast d.
Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes
Accounting for income taxes is very much in the public spotlight in 2012 as sweeping tax reforms are taking center stage in election-year issues, and standard-setters are reconsidering the accounting rules for private companies. Taking the initiative in these challenging times, the Financial Accounting Foundation (FAF) selected “accounting for uncertainty in income taxes” as the standard for its first post-implementation review. This standard was originally issued as FASB Interpretation No. 48 (FIN 48), and it has been widely faulted for:
1. not providing a commensurate amount of value compared to the cost to implement,
2. raising the risk of adverse economic consequences by providing a “roadmap” that leads tax authorities to risky tax positions, and
3. for reflecting a standard-setting bias toward large public companies.
In separate attempts to evaluate the concerns, the FAF completed its review in January, and Congress held hearings in February and March on the interaction of tax policy and financial accounting rules and the special challenges faced by smaller and closely-held businesses.
Similar to FASB Proposals Affecting Government Contractors (20)
Forensics and Fraud: Red Flags and War StoriesDecosimoCPAs
Principal Mike Costello, CPA•ABV•CFF, ASA, CFE, Director of Litigation Support Sharon P. Hamrick, CPA•CFF, CFE and Senior Manager Pamela S. Mantone, CPA•CFF, CFE, FCPA, CITP, CGMA co-presented the topic "Forensics and Fraud: Red Flags and War Stories" at the 2013 TSCPA FSV Conference, during which they shared from their experiences the details of various fraud schemes and methods used to detect and investigate them. - See more at: http://decosimo.com/www/announcements/540.8136/forensic-accounting-fraud-specialists-share-expertise-tscpa#sthash.eEdR6hfE.dpuf
Assurance Principal Jennifer Goodman presented "What Was the FASB Thinking?," a discussion and examples of unusual accounting rules, at the 2013 Decosimo Accounting Forum hosted by the University of North Alabama on July 19.
Principal in Charge of Assurance Department at Decosimo Tom Eiseman presented "Back to the Future Part I & II - Plans for Private Company Reporting" at the 2013 Decosimo Accounting Forum hosted by the University of North Alabama on July 19.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
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In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
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Anny Serafina Love - Letter of Recommendation by Kellen Harkins, MS.
FASB Proposals Affecting Government Contractors
1. A Global Reach with a Local Perspective
2011
Rocket City
Gov Con
Conference
September 22, 2011
www.decosimo.com
FASB Proposals Affecting Gov‟t Contractors
ROBERT BELCHER, CPA
KEN CONNER, CPA
2. Agenda
Overview and scope of the exposure draft
Core principles and implementation guidance
Recap of some key changes affecting government
contractors
Preparing for the adoption of the new revenue
recognition standard
3. FASB/IASB PROJECTS AND TARGET DATE
2011/2012
2012
Project 3Q 4Q 1H
Balance Sheet - Offsetting F
Consolidation: Policy & Procedures E
Consolidation: Investment Companies E
Revenue Recognition E
Accounting for Financial Instruments E
Leases E
Insurance Contracts E
Emissions Trading Schemes L
Financial Instruments with Characteristics of Equity L
Financial Statement Presentation L
Reporting Discontinued Operations L
F - Final document
E - Exposure draft
4. FASB-ONLY PROJECTS
Expected Date
2011
Project 3Q 4Q
Disclosure about an Employer's Participation in a
Multi-Employer Plan F
Goodwill Impairment Assessment F
Codification Technical Corrections E
Investment Properties E
Disclosure about Risks and Uncertainties and the
Liquidation Basis of Accounting E
Disclosure Framework D
Disclosure of Certain Loss Contingencies
F - Final document
E - Exposure draft
D – Discussion paper
5. Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying
Amounts
When Will the Amendments Be Effective?
For public entities, the amendments in this Update are effective for fiscal years,
and interim periods within those years, beginning after December 15, 2010.
Early adoption is not permitted.
For nonpublic entities, the amendments are effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Nonpublic
entities may early adopt the amendments using the effective date for public
entities.
Upon adoption of the amendments, an entity with reporting units that have
carrying amounts that are zero or negative is required to assess whether it is
more likely than not that the reporting units’ goodwill is impaired. If the entity
determines that it is more likely than not that the goodwill of one or more of its
reporting units is impaired, the entity should perform Step 2 of the goodwill
impairment test for those reporting unit(s). Any resulting goodwill impairment
should be recorded as a cumulative-effect adjustment to beginning retained
earnings in the period of adoption. Any goodwill impairments occurring after the
initial adoption of the amendments should be included in earnings as required
by Section 350-20-35.
6. FASB Going Concern Project
The going concern assumption is fundamental to accrual accounting.
To assume that an entity will continue in business is to say that the entity
expects to realize its assets at the recorded amounts and to extinguish its
liabilities in the normal course of business. If the going concern assumption
fails, then the amount and classification of assets and liabilities in the
balance sheet may need to be adjusted, with consequences to revenues,
expenses, and equity.
Among other things, the going concern assumption justifies the current and
non-current classification within the balance sheet, the allocation of costs
over periods benefited, historical cost accounting, and most aspects of the
revenue recognition and matching principles.
Continuation of an entity as a going concern is assumed in financial
reporting in the absence of significant information to the contrary. Therefore,
going concern is an accounting assumption.
In other words, the financial statements (which are the assertions and
responsibility of management) should convey this going concern
assumption (or lack thereof).
7. FASB Going Concern Project
During 2007, 2008 and 2009 (no figures for 2010 as of the date this
presentation was prepared), over 3,000 public companies (or about
20% of U.S. public companies) had going concern paragraphs in
their audit report during each year.
Some people say, “going concern opinions,” but that is not true
because having that paragraph in an audit report does not affect the
opinion on the financial statements. It is an “explanatory
paragraph,” so it should be called, “a paragraph in the report” rather
than a “going concern opinion.”
It’s not a death sentence. All 3,000 of these companies did not go
out of business since they were classified as a going concern.
8. FASB Going Concern Project
The Financial Accounting Standards Board (FASB) has proposed
changes that would provide guidance on the preparation of financial
statements as a going concern and on management's responsibility to
evaluate a reporting entity's ability to continue as a going concern. It
also would require certain disclosures when the financial statements
are not prepared on a going concern basis, as well as provide guidance
on the adoption and application of the liquidation basis of accounting.
The FASB proposal states that accounting guidance about the going
concern assumption should be directed specifically to management of a
reporting entity because management is responsible for preparing an
entity's financial statements and evaluating its ability to continue as a
going concern.
As an auditor, we are evaluating management's assertion about the
entity's ability to continue as a going concern. The consideration of an
entity's ability to continue as a going concern is required in every audit
performed under GAAS, and is an especially important consideration in
the current state of the economy.
9. FASB Going Concern Project
TIME HORIZON
AU §341 states that there is "a responsibility to evaluate whether
there is substantial doubt about the entity's ability to continue as a
going concern for a reasonable period of time, not to exceed one
year beyond the date of the financial statements being audited."
International Accounting Standard (IAS 1), Presentation of Financial
Statements, requires that an entity consider "all available
information about the future, which is at least, but is not limited to 12
months from the end of the reporting period" when assessing
whether the going concern assumption is appropriate.
The FASB decided to use the time horizon in IAS 1 because it
avoids the inherent problems that a bright-line time horizon would
create for events or conditions occurring just beyond the one-year
time horizon that are significant and most likely would have to be
disclosed.
10. Consolidation issues
Both the FASB and the IASB agreed that the
contractual ability to direct the activities of an entity
arises from having:
More than half of the voting rights in an entity
controlled by voting rights
Contractual rights within other contractual
arrangements that relate to the substantive activities
of the entity
A combination of contractual rights within other
contractual arrangements and holding voting rights in
the entity.
11. Consolidation issues
The FASB tentatively decided not to amend its current
consolidation guidance to include the concept of “effective
control,” which is when a reporting entity can have control over
an entity by holding less than half of the entity‟s voting rights.
The assessment of whether a reporting entity has ”effective
control” would have required a reporting entity to analyze:
The reporting entity's voting or other rights relative to the size
and dispersion of holdings of other vote holders, together with
voting patterns at previous shareholder meetings
Indicators of power that provide evidence of having the ability to
direct.
Potential Voting Rights (Options and Convertible Instruments)
12. A Global Reach with a Local Perspective
2011
Rocket City
Gov Con
Conference
September 22, 2011
www.decosimo.com
Revenue Recognition
Robert Belcher, CPA
Principal
13. Exposure draft overview
June 2010 FASB and IASB each issued exposure drafts
entitled “Revenue from Contracts with Customers”
Benefits:
Removes inconsistencies in existing standards
Provides a more robust framework
Improves comparability across companies, industries and
capital markets
Simplifies the preparation of financial statements by
reducing the number of requirements
Applies to ALL entities except for rate-regulated entities
Comment period June 24 – October 22, 2010, almost
1,000 letters received
14. Exposure draft status
Redeliberations were substantially completed at the
July 21, 2011 meeting
IASB and FASB announced they will re-expose
proposals in Q3 2011 for a 120 day comment period
Effective date – likely not earlier than annual periods
beginning on or after January 1, 2015; early adoption
probably not permitted
15. Five Distinct Revenue Recognition Steps
Core principle: Recognize revenue to depict the transfer of
goods or services in an amount that reflects the
consideration that an entity receives, or expects to
receive, in exchange for those goods or services.
Applying core principle:
Step #1 - Identify the contract(s) with the customer
Step #2 - Identify separate performance obligations “SPOs”
Step #3 - Determine the transaction price
Step #4 - Allocate transaction price to the SPOs
Step #5 - Recognize the allocated revenue when SPO
satisfied
16. Step #1 – Identify the contract(s) with the
customer
Key provision: An entity should apply the proposed
guidance to each contract identified.
Government contractors will need to consider:
Contract existence i.e. right to receive consideration
and obligations to transfer goods/services
Combine two or more contracts if certain criteria
met
Determine if contract modification results in SPO
17. Contract modifications i.e. change orders
Contract modifications are any change in the scope or
price of a contract.
Treatment of contract modifications:
Account for as separate contract if modification
results in the addition of a SPO at a price that is
commensurate with that additional performance
obligation.
OR
Combine the modification with the contract and
reevaluate the performance obligation and reallocate
the transaction price to each SPO.
18. Step #2 – Identify SPOs
Key provision: Evaluate the terms of the contract and
your customary business practice to identify all
promised goods and services and determine
whether to account for each as a SPO.
A performance obligation is a promise whether
explicit or implicit in a contract to transfer a good or
service to the customer. You will need to consider
your customary business practices.
19. Economic units of measure
Previously the economic unit of measure was the
entire contract but now is the SPOs.
Likely impact on government contractors is that
more economic units of measure will be identified
(i.e. design phase, construction phase, warranty).
Identifying SPOs and allocating the transaction price
will require judgment and therefore experienced
personnel familiar with the new standard will be
needed.
Revenue recognition is tied to satisfaction of SPOs
which may not be directly related to cost incurred;
cost capitalization rules will have an impact.
20. Separate vs. bundle SPOs
If more than one good or service is provided, you
will need to make a determination whether to bundle
or separate the performance obligation.
Account for each promised good or service as a
separate performance obligation only if it is
distinct.
If not distinct, combine good or service with other
promised goods or services until you identify a
bundle of goods or services that is distinct.
In some cases, that would result in accounting for
all the goods or services promised in the contract
as a single performance obligation.
21. Distinct performance obligations
Distinct if either:
1. You regularly sell the good or service separately, or
2. The customer can use the good or service either on its
own or together with resources that are readily available
to the customer.
Exception: If you transfer goods or services at the same time, it
is not necessary to apply the proposed requirements to
each performance obligation separately if accounting for
those obligations together would result in the same
amount and timing of revenue recognition as if they were
accounted for separately.
22. Step #3 – Determine the transaction price
Key provision: The transaction price is the amount of
consideration an entity expects to receive in
exchange for transferring goods or services to a
customer.
To meet that objective, estimate the transaction price
using one of the following methods depending on
which is most predictive of the amount of entitled
consideration:
The probability-weighted amount; or
The most likely amount.
This amount would then be allocated to the SPOs.
23. Step #4 – Allocate the transaction price
Key provision: Allocate the transaction price to all
SPOs in proportion to the standalone selling price of
the good or service underlying each performance
obligation at contract inception.
The best evidence of a standalone selling price
would be the observable price of a good or service
when you sell it separately.
24. Step #5 – Recognize revenue when
performance obligation satisfied
Key provision: Recognize revenue when a
performance obligation is satisfied.
In order to transfer a good or service, the customer
must obtain control.
Indications the customer has taken control:
Customer has unconditional obligation to pay
Customer has legal title
Customer has physical possession; exceptions
allowed for consignments and bill and holds.
Design or function is customer specific
Risk of ownership has passed to customer
25. Two options for revenue recognition: point in time
or over time
Identify each performance obligation within a contract
and determine if performance obligation is satisfied:
At a point in time, or
Recognize revenue when control of asset is transferred
to customer.
Over time i.e. continuous transfer.
Recognize revenue as performance obligation is
satisfied.
26. Over time i.e. continuous transfer
Recognize a performance obligation over time if:
Your performance creates or enhances an asset that the
customer controls as the asset is being created, or
Your performance does not create an asset with an
alternative use to you and at least one of the following:
Customer receives a benefit as you perform each task;
Another entity would not need to re-perform the tasks
performed to date if that other entity were to fulfill the
remaining obligation to the customer, or
You have a right to payment for performance to date
even if the customer could cancel the contract for
convenience.
27. Over time revenue recognition methods
1. Output method – Recognize on basis of units produced
or delivered, contract milestones or surveys of goods or
services transferred to date relative to the total.
2. Input method – Recognize on basis of efforts expended
to date (cost of resources consumed, labor hours
expended, machine hours used) relative to total efforts
to be expended.
3. Passage of time method – Recognize revenue on a
straight-line basis over the expected duration of the
contract if services are transferred evenly over time
(licenses).
28. Recap of key concepts
Fewer contracts may qualify for over time i.e.
continuous transfer revenue recognition. Need to review
contract terms closely.
You need to meet over time i.e. continuous transfer
requirements to be able to recognize revenue on an
incomplete asset.
Determine if you must account for change orders as
separate contracts or modifications to existing contracts
(and potentially new SPO).
The total transaction price is allocated to SPOs based on
relative standalone selling prices.
29. Recap of key concepts
Contract cost have been divorced/separated from
contract revenues therefore the new standard will
address accounting for cost capitalization.
If cost capitalization rules were not added, many
government contractors might incur negative margins in
the early stages of contracts if performance obligation
not yet met.
Changes to estimated future COST are not recognized
immediately unless you expect a loss on the specific
SPO.
30. Other significant items in exposure draft
Warranties
Account for a product warranty that related to quality
assurance by accruing warranty cost of the time
revenue is recognized rather than by deferring
revenue.
A warranty is a SPO if:
Customer has option to purchase the warranty separately
from the vendor, or
Warranty provides a service to customer in addition to
assurance that the vendor’s past performance occurred as
specified in the contract.
31. WHAT YOU NEED TO DO
Apply the proposed standard to your specific
customer contracts to determine the impact.
It will be challenging to truly know the impact of this
proposed guidance without applying it directly to your
contracts and working through each of the principles.
Are your current internal controls and operating
systems sufficient?
Budget and plan for training for your staff
Remember retroactive application
Will the new standard impact debt covenants?
Discuss with your tax preparer.
32. RESOURCES
FASB Proposed Accounting Standards Update –
Revenue Recognition (Topic 605)
FASB In Focus –short 2-page summary of proposal
FASB website – technical plan and project updates
tab
AICPA Accounting and Auditing Brief June 16, 2011 -
good information on redeliberation impact on
exposure draft
Revenue Recognition Guide – Chapter 13 Future
Expectations – Short 13-page summary of exposure
draft however redeliberation impact is not
incorporated
33. Example – Long-term contract
An entity enters into a contract to construct a facility or
produce a product for a customer
Requires engineering (design), procurement and
production activities
Design is specific to the customer’s requirements and
they are involved in specifying major elements
The entity procures materials and equipment as they
are needed during production
Customer obtains control of materials and equipment as
they are installed
Production is expected to take 3 years
34. Example – Long-term contract
How would the entity recognize revenue?
(Under current GAAP, combine all activities and apply
percentage of completion or completed contract.)
35. Example – Long-term contract
Design services:
Distinct? Yes, contractor regularly sells design services
separately.
When do you recognize? Over time as service is
performed - The vendor’s performance does not create
an asset with an alternative use to the vendor AND the
vendor has a right to payment for performance to date
even if the customer could cancel the contract for
convenience.
36. Example – Long-term contract
Procurement service:
Distinct? No, construction company doesn’t regularly
provide procurement services. Procurement is an activity
that is necessary for the entity to obtain control of the
promised materials and equipment.
When do you recognize? N/A
37. Example – Long-term contract
Construction:
Distinct? Divide into separate performance obligations if
the pattern of transfer of the good or service is different
from the pattern of transfer of other promised goods or
services in the contract, and the good or service has a
distinct function.
When do you recognize? Recognize revenue for each
performance obligation over time or with the passage of
time when it is satisfied.
38. A Global Reach with a Local Perspective
2011
Rocket City
Gov Con
Conference
September 22, 2011
www.decosimo.com
Leases – The Winding Road Ahead
A Review of Current and Proposed Lease Treatment
KEN CONNER, CPA
Principal
39. Objectives
Review of current GAAP related to leases
Case study on Capital versus Operating Leases
Current Exposure Draft for Leases –
What is the objective
What are they proposing
How will it work
Examples of calculations
40. Leases – Current GAAP
Capital leases meet one or more of the following
criteria:
1) The lease conveys ownership to the lessee at the
end of the lease term.
2) The lessee has an option to purchase the asset at
a bargain price at the end of the lease term.
3) The term of the lease is 75% or more of the
economic life of the asset.
4) The present value of the rents, using the lessee's
implicit or incremental borrowing rate, is 90% or more
of the fair market value of the asset.
Operating leases - All other leases
41. Leases – Current GAAP
Lessee’s incremental borrowing rate - The rate that,
at the inception of the lease, the lessee would have
incurred to borrow over a similar term the funds
necessary to purchase the leased asset.
Interest rate implicit in the lease - The discount rate that, when
applied to (i) the minimum lease payments, excluding that portion of the
payments representing executory costs to be paid by the lessor, together with
any profit thereon, and (ii) the unguaranteed residual value accruing to the
benefit of the lessor, causes the aggregate present value at the beginning of the
lease term to be equal to the fair value of the leased property to the lessor at the
inception of the lease, minus any investment tax credit retained by the lessor
and expected to be realized by him.
42. Capital or Operating – what is important?
When does the reader of the financial statements
really care about lease obligations of any type? What
is material?
15 year building lease that qualifies as operating
Five year equipment lease that has a NPV of 75%, 80%,
89%
How is a three year lease obligation different from a
three year note payable?
43. Why are FASB and IASB Looking at Lease
Accounting
Leasing is an important source of finance.
Provides users of financial statements with a
complete and understandable picture of an entity‟s
leasing activities.
The models also lead to a lack of comparability and
undue complexity because of the sharp „bright-line‟
distinction between capital leases and operating
leases.
A new approach to lease accounting that would
ensure that assets and liabilities arising under
leases are recognized in the statement of financial
position.
From FASB Exposure Draft Leases - August 17, 2010
44. General rules
The right-to-use model, what today we
would term a Capital Lease, – any lease
greater than a year
Use of the old “Operating lease model”–
all other leases
45. Lessee Accounting - General
“A lessee would recognize an asset (the right-of-use
asset) representing its right to use an underlying
asset during the lease term, and a liability to make
lease payments. The lessee would amortize the right-
of-use asset over the expected lease term or the
useful life of the underlying asset if shorter. The
lessee would incur interest expense on the liability
to make lease payments.”
• SOURCE: Exposure Draft and FASB LEASE UPDATES
APRIL 2011
46. Does not apply to -
Short term leases – defined by FASB at its meeting of June 23,
2011 as, “A lease that, at the date of commencement of the
lease, has a maximum possible term, including any options to
renew, of 12 months or less.” (Emphasis added)
An entity can elect to treat short term leases on a right-to-use
basis on a case-by-case basis
“Leases” covered elsewhere in GAAP
Leases with the right to explore for oil and minerals
Leases for intangibles
Leases for biological assets (i.e. timber or agricultural products)
SOURCE: Exposure Draft, minutes of June 23, 2011 FASB meeting
47. What would it do?
(a) A lessee would recognize an asset representing its right to
use the leased („underlying‟) asset for the lease term (the „right-
of-use‟ asset) and a liability to make lease payments.
(b) A lessor would recognize an asset representing its right to
receive lease payments and, depending on its exposure to risks
or benefits associated with the underlying asset, would either:
(i) recognize a lease liability while continuing to recognize the
underlying asset (a performance obligation approach); or
(ii) derecognize the rights in the underlying asset that it transfers
to the lessee and continue to recognize a residual asset
representing its rights to the underlying asset at the end of the
lease term (a derecognition approach).
SOURCE: Exposure Draft and FASB LEASE UPDATES APRIL 2011
48. Key Components to Measurement
Assets and liabilities recognized by lessees and lessors would
be measured on a basis that:
(a) assumes the initial term of the lease and options to renew if
there is an economic incentive to extend the lease term. (Origin
Exposure Draft included option to renew, “that is more likely than not to occur”, taking into
account the effect of any options to extend or terminate the lease).
(b) included fixed lease payments, variable payments that are
effectively fixed payment and variable payments tied to a rate or
index. (Original Exposure Draft included contingent payment based on an expected outcome
technique to reflect the lease payments, including contingent rentals and expected payments under
term option penalties and residual value guarantees, specified by the lease).
(c) is updated when changes in facts or circumstances indicate
that there would be a significant change in those assets or
liabilities since the previous reporting period.
• SOURCE: Exposure Draft and FASB LEASE
UPDATES APRIL 2011
49. Key Components to Measurement
Other measurement notes
Don’t change the interest rate on the original measurement
unless there has been a significant change
Election of option to renew
Renegotiation of key lease terms
The lessee should allocate payments as follows:
If the purchase price of each component is observable, the
lessee would allocate the payments on the basis of the
relative purchase prices of individual components;
If the purchase price of one or more, but not all, of the
components is observable, the lessee would allocate the
payments on the basis of a residual method; or
If there are no observable purchase prices, the lessee
would account for all the payments required by the
contract as a lease.
50. Example A
Terms of the Lease –
Five year triple net operating lease at $48,000 in year
one due on the first day of the month
Lease payments escalate at 3% per year with no
contingent payments
Incremental borrowing rate is 7%
51. Example A
Record lease value –
Lease Rights $218,042
Lease Obligation $218,042
Entry to record payment in month two –
Lease Obligation $2,752
Interest Expense $1,248
Cash $4,000
Entry to record „use‟ of lease property
Lease Amortization - $3,634
Accumulated Amortization $3,634
52. Renewal Options
ED: longest possible term that is more likely than not
to occur
Changes:
Options to extend or terminate when there is a
significant economic incentive to extend, or not to
terminate the lease
Reassess only when there is a significant change in
relevant factors
• SOURCE: FASB LEASE UPDATES APRIL 2011
53. Transition
There is no grandfather clause.
Speculation is that there will be a long lead time to
the effective date- (i.e. 2015).
Interest rate determined at the date of application.
Any prepaid or deferred rent at the date of
application included in the amortization of lease
rights.
Capital leases with no economic incentives to renew
will use the carrying value established under capital
lease treatment.
54. Consequences
How will lenders view the change in the short term?
In the long term?
Raises EBITDA, by adding an interest component
previously imbedded in operating leases
Raises „debt‟ obligation and debt to equity ratio
If we know what the numbers are, do the bankers
and lawyers know what the documents say?
Will it make as much sense to use debt as leases in
the future?
55. Consequences
Lowers debt service coverage – increases „debt‟
payments and money available for debt service by
same amount, raising the denominator by a greater
percentage
Existing - Old New Lease Revised Debt
Rule Amounts Service
Available for Debt
Service $4,000,000 $500,000 $4,500,000
Debt Service
Requirement $2,000,000 $500,000 $2,500,000
Debt Coverage
Ratio 2.00 1.80
56. What is next -
FASB – intends to release another exposure draft for
public comment before the end of 2011
Implementation – pending final
57. Reference Sources
Lease Update – Most current (September 16, 2011)
http://www.fasb.org/cs/ContentServer?c=FASBConten
t_C&pagename=FASB%2FFASBContent_C%2FProje
ctUpdatePage&cid=900000011123#decisions
Original Exposure Draft
http://www.fasb.org/cs/BlobServer?blobcol=urldata&bl
obtable=MungoBlobs&blobkey=id&blobwhere=11758
21125393&blobheader=application%2Fpdf
58. Annual Tax Seminar
Save the Date!
Decosimo‟s Tax Seminar
Nov. 15th
Receive up to 8 hours of CPE
Find more information online at:
http://decosimo.com/2011taxseminar
Or See a Decosimo Representative
59. Connect with me
H. Kennedy (Ken) Conner, CPA
Principal – North Alabama
Development
423.756.7100
kenconner@decosimo.com
On LinkedIn:
http://www.linkedin.com/in/kenconner
Disclaimer:
The contents of this presentation are for informational purposes only. The information is not intended to be a substitute for
professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you
may have regarding your financial goals or specific situations.
60. CONTACT ROBERT BELCHER
Robert Belcher, CPA
Assurance Principal
robertbelcher@decosimo.com
423-756-7100
DISCLAIMER: The contents and opinions contained in this presentation are for informational purposes
only. The information is not intended to be a substitute for professional accounting counsel. Always seek
the advice of your accountant or other financial planner with any questions you may have regarding your
financial goals.