The New England Accounting Advisor

Until now, private companies may have been able to avoid implementing the new lease accounting standard, ASC 842. The standard — one of the most significant recent changes in accounting — was issued in 2016 and has already gone into effect for public companies. However, the Jan. 1, 2022 deadline for private companies is now fast approaching, and the switchover will not be easy. The transition will likely be a meticulous, time-consuming, and complicated process, as the new standard directly impacts how organizations should account for leases. But the substantial accounting changes are not the only reason why private companies must start preparing now to comply with the new standard.

Topics: lease accounting changes, Lease Standards, asc topic 842, Leases, lease accounting

During the first quarter of 2020, the economic decline caused by the COVID-19 pandemic has raised many questions about the fair value of a variety of assets held in a broad range of industries and companies. This has been demonstrated by the significant declines in public share prices by many public companies as well as the declines noted in the broader stock market indices.

Topics: goodwill impairment, impairment testing, public company, ASC Topic 606, Coronavirus, COVID-19

The Coronavirus disease (COVID-19) pandemic has effected countless aspects of our daily lives and business, and accounting is no exception. Many companies will need assistance navigating the complexities of accounting guidance—particularly during these times of uncertainty and business and workflow disruptions. The COVID-19 pandemic will likely impact a variety of your accounting estimates and the application of current accounting guidance. It may also require your organization to perform a number of analyses and tests during an interim period that may otherwise have not been necessary. You will be required to create detailed memoranda and documentation to illustrate that the proper analysis supports the conclusions reached for your auditors and Q1 filing. We are here to help Securities and Exchange Commission (SEC) filers navigate and interpret the applicable accounting guidance during these ever-changing times, as well as aid with the preparation of technical memoranda and other documentation that you are required to prepare.

Topics: goodwill, public company, Revenue recognition, intangible assets, ASC Topic 606, Coronavirus, COVID-19, sec filer, ROU assets, ASC 350, SEC extension

What a long, strange trip it’s been from the release of the new revenue recognition standard to the adoption year for private companies. The Financial Accounting Standards Board (FASB) released its initial changes to accounting for revenue from contracts five years ago under ASC Topic 606, Revenue from Contracts with Customers. In the intervening years, changes have been made, effective dates delayed, and public companies adopted the standard.

Topics: Revenue Recognition Standard, Revenue recognition, ASC Topic 606

As the effective date of the new revenue standard draws nearer and implementation becomes imminent for non-public entities within its scope, management should be aware of some important areas that their auditors will be focusing on in the upcoming months.

Topics: private companies, private company, FASB, Revenue recognition, Financial Accounting Standards Board, ASC Topic 606, Revenue from Contracts with Customers

Public business entities will be among the first adopters of the revenue recognition standard and must implement the changes at the beginning of the 2018 calendar year. In anticipation of the first financial statement audits that include the new revenue recognition standard, the PCAOB released Staff Audit Practice Alert No. 15: Matters Related to Auditing Revenue from Contracts with Customers. It highlights six provisions of the new revenue recognition standard that pose the greatest risk for audit deficiencies. Although the PCAOB directs the staff alert at auditors of the public sector, the audit risks will be similar for private business entities as well.

Topics: Revenue Recognition Standard, Revenue recognition, ASC Topic 606, ASC 606

Revenue recognition under ASC Topic 606 includes new and extensive disclosure requirements that will significantly impact revenue-generating companies, whether publicly traded or privately held.

Topics: Revenue Recognition Standard, Revenue recognition, ASC Topic 606

Topic 606 introduces a 5-step process for the recognition of revenue that applies to all entities that have contracts with customers within its scope. Entities that license intellectual property (licenses) through contracts with customers also apply the 5 steps but have some special considerations that are applicable to the unique nature of licenses.

Topics: Revenue Recognition Standard, Revenue recognition, Licensing Arrangements

Once entities allocate the transaction price, they can then move to the fifth and final step of the new revenue recognition standard: recognizing revenue. Step 5 requires entities to recognize the consideration given for an asset when or as the performance obligation has been satisfied. This point occurs when the customer receives control of the good or service.

Topics: Revenue Recognition Standard, Revenue recognition, Performance obligations

Six elements the Joint Transition Resource Group for Revenue Recognition earmarked for change became part of the final standard recently. Accounting Standards Update (ASU) 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients, updates guidance related to collectibility, presentation of sales and use taxes, noncash consideration, contract modifications and completed contracts at transition.

The bulk of the changes remain the same as outlined in the exposure draft released last fall. The ASU also includes a technical correction.

Topics: Revenue Recognition Standard, Revenue recognition, Transaction Price