book

Audit and Accounting Guide

by AICPA

April 2019

Intermediate to advanced

1024 pages

38h 20m

English

Wiley

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IntroductionAuthoritative Status and Effective DateTransitioning to the New StandardPost-Standard ActivityOverview of FASB ASU No. 2014-09, Revenue from Contracts with CustomersStep 1: Identify the Contract With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance ObligationCosts to Obtain or Fulfill a Contract With a CustomerIncremental Costs of Obtaining a ContractCosts of Fulfilling a ContractDisclosuresOther TopicsPresentation of Contract With a CustomerSale With a Right of ReturnWarrantiesPrincipal Versus AgentCustomer Options for Additional Goods or Service — Material RightsCustomer’s Unexercised RightsNonrefundable Upfront FeesLicensingRepurchase AgreementsConsignment ArrangementsBill-and-Hold ArrangementsCustomer AcceptanceThird-Party Extended Service Warranty Contracts Within the Scope of FASB ASC 606
IntroductionAuditing the Five-Step Model of FASB ASC 606Step 1: Identify the Contract(s) With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance ObligationAuditing Considerations in the Adoption and Transition to FASB ASC 606General Audit Considerations Over Revenue RecognitionRisk Assessment and Fraud Risk Under FASB ASC 606Audit PlanningAssignment of Personnel and SupervisionEstablishing an Overall StrategyAudit RiskUnderstanding the Entity and Risk AssessmentInquiryReading and Understanding ContractsReviewing Process Narratives and Process Flow DiagramsReviewing Internal Control Manuals, Policy Manuals, or Similar DocumentationDiscussion Among the Audit TeamAssessing the Risks of Material MisstatementIdentification of Significant RisksSpecific Audit Considerations Over Revenue RecognitionSide AgreementsChannel StuffingRelated-Party TransactionsSignificant Unusual TransactionsNature of Business and Accounting for RevenuePotential Accounting MisstatementsIdentify the Contract With the CustomerIdentify the Performance Obligations in the ContractsDetermine the Transaction PriceAllocate the Transaction Price to the Performance ObligationsRecognize Revenue When (or as) the Entity Satisfies a Performance ObligationConsideration of Fraud as it Relates to RevenueDiscussion Among Engagement Personnel Regarding the Risks of Material Misstatement Due to FraudThe Importance of Exercising Professional SkepticismIFRS 15 Versus FASB ASC 606The Role of Controls Over Financial Reporting in Revenue RecognitionControl EnvironmentRisk AssessmentControl ActivitiesInformation and CommunicationMonitoringObtaining Audit EvidenceTypes of Substantive ProceduresPotential Issues in Obtaining Audit EvidenceAudit Evidence Related to the Five Steps of Revenue Recognition Under FASB ASC 606Auditing EstimatesPotential Area of Focus — Management BiasManagement RepresentationsIndependenceConsultationSituations in Which Auditors Can Assist During TransitionDisclosuresSmaller EntitiesAudit Documentation
Application of the Five-Step Model of FASB ASC 606Step 1: Identify the Contract With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfied a Performance ObligationOther Related TopicsContract CostsAccounting for Offset ObligationsDisclosures — Contracts With Customer
Application of the Five-Step Model of FASB ASC 606Step 1: Identify the Contract With a CustomerRevenue StreamsRecognition of Contingent Deferred Sales ChargesManagement Fee Revenue, Excluding Performance Fee RevenueIncentive or Performance Fee Revenue, Excluding Incentive-Based Capital Allocations (Such as Carried Interest)Incentive-Based Capital AllocationsAsset Management Arrangement Revenue — Gross Versus NetOther Related TopicsDeferred Distribution Commission Expenses (Back-End Load Funds)Management Fee Waivers and Customer Expense ReimbursementsCosts of Managing Investment Companies
Revenue StreamsCommission IncomeUnderwriting RevenuesSoft DollarsInvestment Banking M&A Advisory FeesSelling and Distribution Fee RevenueOther Related TopicsScopeCosts Associated With Investment Banking Advisory ServicesPrincipal Versus Agent: Costs Associated With Underwriting
Application of the Five-Step Model of FASB ASC 606Step 2: Identify the Performance Obligations in the ContractRevenue StreamsDefinitions: The Terms Win and Gross Gaming RevenueLoyalty Credits and Other Discretionary Incentives (Excluding Status Benefits)Accounting for Loyalty Points Redeemed With Third PartiesAccounting for Loyalty Co-branding ArrangementsAccounting for Management Contract Revenues, Including Costs Reimbursed by Managed PropertiesOther Related TopicsAccounting for Jackpot Insurance Premiums and RecoveriesAccounting for Gaming Chips and TokensNet Gaming RevenueGaming Operator’s Accounting for Base Progressive and Incremental Progressive Jackpot AmountsPromotional AllowancesParticipation and Similar ArrangementsIncome Statement Presentation of Wide Area Progressive Operators’ Fees Received From Gaming EntitiesRecognition of the WAP Operator’s Liability for Base Progressive and Incremental Progressive Jackpot AmountsAccounting for Racetrack FeesDisclosures — Contracts With CustomersGaming Entity’s Costs to Obtain a Management Contract
Application of the Five-Step Model of FASB ASC 606Step 2: Identify the Performance Obligations in the ContractStep 5: Recognize Revenue When (or As) the Entity Satisfied a Performance ObligationRevenue StreamsArrangements for Health Care Services Provided to Uninsured and Insured Patients With Self-Pay Balances, Including Co-Payments and DeductiblesThird-Party Settlement EstimatesRisk Sharing ArrangementsApplication of FASB ASC 606 to Continuing Care Retirement Community ContractsOther Related TopicsApplication of the Portfolio ApproachPresentation and DisclosureAccounting for Contract Costs
Revenue StreamsTuition and Housing RevenuesNot-for-Profit Subscriptions and Membership DuesOther Related TopicsScopeBifurcation of Transactions Between Contribution and Exchange Components
Application of the Five-Step Model of FASB ASC 606Step 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
Application of the Five-Step Model of FASB ASC 606Step 2: Identify the Performance Obligations in the ContractStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractRevenue StreamsInterline Transactions — Identifying Performance Obligations for Air Travel (Including at the Segment Versus Ticket Level) and Principal Versus Agent ConsiderationsInterline Transactions — Loyalty PaymentsBrand Name and Customer List in Co-Branded Credit Card Agreements — Timing of Revenue RecognitionConsideration of Significant Financing Component in Advance Mile Purchases Under Co-Branded Credit Card Agreements and Miles in Customers’ AccountsRegional ContractsTiming and Classification of Commissions in Interline TransactionsChanges in the Volume of Mileage Credits Under a Co-Branded Credit Card ArrangementOther Related TopicsAccounting for Contract Costs — Commissions and Selling CostsAccounting for Passenger Taxes and Related FeesAccounting for Passenger Ticket Breakage and Travel VouchersAccounting for Ancillary Services and Related FeesAccounting for Change Fees

Application of the Five-Step Model of FASB ASC 606Step 1: Identify the Contract With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance ObligationOther Related TopicsDisclosures and PresentationContract Costs
Application of the Five-Step Model of FASB ASC 606Other Related TopicsSale of Non-Operating Assets (Other Real Estate Owned)Scope
Application of the Five-Step Model of FASB ASC 606Step 1: Identify the Contract With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractOther Related TopicsPortfolio AccountingDisclosure and TransitionAccounting for Contract CostsMiscellaneous FeesWireless Transactions Within the Indirect ChannelMaterial Renewal Rights in Telecommunications ContractsContract Modifications
Other Related TopicsConsiderations for Applying the Scope Exception in FASB ASC 606-10-15-2 and 606-10-15-4 to Contracts Within the Scope of FASB ASC 944
Application of the Five-Step Model of FASB ASC 606Step 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance ObligationRevenue StreamsAccounting for Tariff Sales to Regulated CustomersRequirements and Similar Contracts With Variable VolumesFixed Price Contracts — Consideration of Different Pricing ConventionsOther Related TopicsAccounting for Blend-and-Extend Contract ModificationsPartial TerminationsTreatment of Contributions in Aid of Construction (CIAC)Income Statement Presentation of Alternative Revenue Programs
Application of the Five-Step Model of FASB ASC 606Step 1: Identify the Contract With a CustomerStep 2: Identify the Performance Obligations in the ContractStep 4: Allocate the Transaction Price to the Performance Obligations in the ContractStep 5: Recognize Revenue When (or as) the Entity Satisfies a Performance ObligationRevenue StreamsManagement FeesOther Related TopicsPrincipal Versus Agent Considerations for Time-Share Interval SalesContract Costs
Application of the Five-Step Model of FASB ASC 606Step 2: Identify the Performance Obligations in the ContractStep 3: Determine the Transaction PriceRevenue StreamsFranchise FeesHotel Management Service ArrangementOwned and Leased Property Revenues
Application of the Five-Step Model of FASB ASC 606 Revenue StreamsRevenue StreamsOther Related TopicsDerivative Commodity ContractsInventoriesJoint Operating AgreementsDisclosures

Overview

ASC 606, Revenue from Contracts with Customers, replaces almost all previously existing revenue recognition guidance, including industry-specific guidance. That means unprecedented changes, affecting virtually all industries and all size organizations.

For preparers, this guide provides the comprehensive, reliable accounting implementation guidance you need to unravel the complexities of this new standard. For practitioners, it provides in-depth coverage of audit considerations, including controls, fraud, risk assessment, and planning and execution of the audit. Recent audit challenges are spotlighted to allow for planning in avoiding these new areas of concern.

This guide includes 16 industry-specific chapters for the following industries: Aerospace and Defense, Airlines, Asset Management, Broker-Dealers, Construction Contractors, Depository Institutions, Gaming, Health Care, Hospitality, Insurance, Not-for-Profits, Oil and Gas, Power and Utility, Software, Telecommunications, and Timeshare.