It’s all but official. On October 16th, the FASB voted to approve delays for private companies on three new accounting standards, one of which is Leases. The expected Accounting Standards Update (ASU), on which FASB voting will be the official action to implement the deferrals, is expected in November. By the way, the other two standards deferred under this vote are “credit losses” (or CECL) and “hedging”. As the effective date draws closer, we will certainly be posting about CECL, since some aspects apply to all companies. (more…)
Revenue Recognition Update – Step 3: Determine a Transaction Price
By Josh Cross, Senior Audit Manager
Now that all of the performance obligations (Step 2) of the contract have been separately identified, it’s time to determine a transaction price. Seems easy, right?
ASC 606 defines the transaction price as “the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).” On the surface this sounds like an easy step for your entity to identify the price you are selling a product for, but in practice we know that not all transaction prices are fixed at the onset of the contract. When calculating the transaction price, an entity needs to consider all of the following: (more…)
Revenue Recognition Update - Step 1: Identify the Contract with the Customer)
Revenue recognition is getting a lot of attention since ASC Topic 606 “Revenue from Contracts with Customers” was first issued in 2014. Since that date, we have had several posts on our blog that focus on some of the details and changes related to the new standard. As we get closer to implementation, it is time to take a closer look. (more…)
Debt Issuance Costs – Accounting Presentation Rules Demystified
“Debt issuance costs” are costs incurred that would not have been incurred had not an entity procured a new debt instrument – in other words, incremental costs directly related to the new financing. The FASB Accounting Standards Codification (ASC), interestingly, does not define “debt issuance costs”, although the FASB issued two Accounting Standards Updates (ASUs) in 2015 related to presentation of debt issuance costs, with effective dates for nonpublic companies for financial statements covering fiscal years ended in December 2016 or later. (more…)
IFRS – a Few Considerations Before Taking the Plunge
It sure seems like it was a long time ago that I had anything to say on the subject of IFRS. Quite recently, a client approached me requesting assistance with the conversion of their US GAAP basis financials to IFRS to conform to their parent company’s presentation. And as I explained the key differences to them, I thought to myself, wouldn’t it be nice if I had a cheat sheet of considerations for making the switch to IFRS? To me, understanding the differences between the two standards and the advantages (or disadvantages) of one over the other can go a long way in deciding whether IFRS is the more logical choice and if so, how to plan the conversion. (more…)
Management Now Tasked with “Going Concern” Appraisal
By Kay Filler, A&A Principal
ASL Assurance & Accounting
Historically originating through the lens of the independent auditor, whose auditing standards require the auditor to consider “going concern” matters and potentially include cautionary language in the auditor’s report, all companies that issue GAAP-based financial statements are now required to perform their own evaluation and provide explanatory footnote disclosures in defined circumstances. (more…)
Statement of Cash Flows – Refreshed After 3 Decades
Diversity in practice led the FASB to revisit the GAAP guidance for the Statement of Cash Flows that has been around since 1987 with the issuance FASB No. 95. Many people thought aspects of these rules were confusing (and contradictory, at times), or even missing entirely. In fact, restatements of public company financial statements often relate to issues with the Statement of Cash Flows (as noted in an earlier post).
Originally planned as a comprehensive project, the FASB altered course to focus efforts on just the most confusing areas, resulting in new guidance covering nine specific issues. The good news is that most of these issues rarely apply to nonpublic tech companies in the Silicon Valley. Eight issues are covered in ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments” issued in August 2016. Several of the issues that might be encountered include handling proceeds from insurance claims, distributions from equity method investees, and contingent consideration payments made after a business combination. Mid-sized companies outside of specific industries would rarely run into the remaining issues. (more…)
Catching Up With More GAAP Simplifications
My first post about the FASB GAAP Simplification Initiative was in April 2015, and I have posted since then about specific GAAP changes under this umbrella that seemed to bestow the most widespread consequences for companies in Silicon Valley. Now seems like a good time to look back over the past year and a half for other GAAP simplification subjects you might not know about, but are not exactly esoteric topics. (more…)
FASB’s Changes to Nonprofit Reporting
By Josh Cross, Senior Audit Manager
ASL Nonprofit Group
Recently the men and women at the Financial Accounting Standards Board (FASB) have been busy providing accountants with no shortage of nighttime reading. In the middle of putting the accounting world on its head with the release of the new Revenue Recognition (Topic 606) and Lease (Topic 842) Accounting Standards, the Not-For-Profit Advisory Committee has been hard at work re-tooling the way nonprofits will have to present their financial statements. (more…)