Audit and Accounting Guide

Book description

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.

Table of contents

    1. 1General Accounting Considerations
      1. Introduction
      2. Authoritative Status and Effective Date
        1. Transitioning to the New Standard
      3. Post-Standard Activity
      4. Overview of FASB ASU No. 2014-09, Revenue from Contracts with Customers
        1. Step 1: Identify the Contract With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 3: Determine the Transaction Price
        4. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        5. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      5. Costs to Obtain or Fulfill a Contract With a Customer
        1. Incremental Costs of Obtaining a Contract
        2. Costs of Fulfilling a Contract
      6. Disclosures
      7. Other Topics
        1. Presentation of Contract With a Customer
        2. Sale With a Right of Return
        3. Warranties
        4. Principal Versus Agent
        5. Customer Options for Additional Goods or Service — Material Rights
        6. Customer’s Unexercised Rights
        7. Nonrefundable Upfront Fees
        8. Licensing
        9. Repurchase Agreements
        10. Consignment Arrangements
        11. Bill-and-Hold Arrangements
        12. Customer Acceptance
        13. Third-Party Extended Service Warranty Contracts Within the Scope of FASB ASC 606
    2. 2General Auditing Considerations
      1. Introduction
      2. Auditing the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract(s) With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 3: Determine the Transaction Price
        4. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        5. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      3. Auditing Considerations in the Adoption and Transition to FASB ASC 606
      4. General Audit Considerations Over Revenue Recognition
      5. Risk Assessment and Fraud Risk Under FASB ASC 606
        1. Audit Planning
        2. Assignment of Personnel and Supervision
        3. Establishing an Overall Strategy
        4. Audit Risk
        5. Understanding the Entity and Risk Assessment
        6. Inquiry
        7. Reading and Understanding Contracts
        8. Reviewing Process Narratives and Process Flow Diagrams
        9. Reviewing Internal Control Manuals, Policy Manuals, or Similar Documentation
        10. Discussion Among the Audit Team
        11. Assessing the Risks of Material Misstatement
        12. Identification of Significant Risks
      6. Specific Audit Considerations Over Revenue Recognition
        1. Side Agreements
        2. Channel Stuffing
        3. Related-Party Transactions
        4. Significant Unusual Transactions
        5. Nature of Business and Accounting for Revenue
      7. Potential Accounting Misstatements
        1. Identify the Contract With the Customer
        2. Identify the Performance Obligations in the Contracts
        3. Determine the Transaction Price
        4. Allocate the Transaction Price to the Performance Obligations
        5. Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      8. Consideration of Fraud as it Relates to Revenue
        1. Discussion Among Engagement Personnel Regarding the Risks of Material Misstatement Due to Fraud
        2. The Importance of Exercising Professional Skepticism
      9. IFRS 15 Versus FASB ASC 606
      10. The Role of Controls Over Financial Reporting in Revenue Recognition
        1. Control Environment
        2. Risk Assessment
        3. Control Activities
        4. Information and Communication
        5. Monitoring
      11. Obtaining Audit Evidence
        1. Types of Substantive Procedures
        2. Potential Issues in Obtaining Audit Evidence
        3. Audit Evidence Related to the Five Steps of Revenue Recognition Under FASB ASC 606
      12. Auditing Estimates
        1. Potential Area of Focus — Management Bias
      13. Management Representations
      14. Independence
        1. Consultation
        2. Situations in Which Auditors Can Assist During Transition
      15. Disclosures
      16. Smaller Entities
      17. Audit Documentation
    3. 3Aerospace and Defense Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 3: Determine the Transaction Price
        4. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        5. Step 5: Recognize Revenue When (or as) the Entity Satisfied a Performance Obligation
      2. Other Related Topics
        1. Contract Costs
        2. Accounting for Offset Obligations
        3. Disclosures — Contracts With Customer
    4. 4Asset Management
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract With a Customer
      2. Revenue Streams
        1. Recognition of Contingent Deferred Sales Charges
        2. Management Fee Revenue, Excluding Performance Fee Revenue
        3. Incentive or Performance Fee Revenue, Excluding Incentive-Based Capital Allocations (Such as Carried Interest)
        4. Incentive-Based Capital Allocations
        5. Asset Management Arrangement Revenue — Gross Versus Net
      3. Other Related Topics
        1. Deferred Distribution Commission Expenses (Back-End Load Funds)
        2. Management Fee Waivers and Customer Expense Reimbursements
        3. Costs of Managing Investment Companies
    5. 5Brokers and Dealers in Securities
      1. Revenue Streams
        1. Commission Income
        2. Underwriting Revenues
        3. Soft Dollars
        4. Investment Banking M&A Advisory Fees
        5. Selling and Distribution Fee Revenue
      2. Other Related Topics
        1. Scope
        2. Costs Associated With Investment Banking Advisory Services
        3. Principal Versus Agent: Costs Associated With Underwriting
    6. 6Gaming Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 2: Identify the Performance Obligations in the Contract
      2. Revenue Streams
        1. Definitions: The Terms Win and Gross Gaming Revenue
        2. Loyalty Credits and Other Discretionary Incentives (Excluding Status Benefits)
        3. Accounting for Loyalty Points Redeemed With Third Parties
        4. Accounting for Loyalty Co-branding Arrangements
        5. Accounting for Management Contract Revenues, Including Costs Reimbursed by Managed Properties
      3. Other Related Topics
        1. Accounting for Jackpot Insurance Premiums and Recoveries
        2. Accounting for Gaming Chips and Tokens
        3. Net Gaming Revenue
        4. Gaming Operator’s Accounting for Base Progressive and Incremental Progressive Jackpot Amounts
        5. Promotional Allowances
        6. Participation and Similar Arrangements
        7. Income Statement Presentation of Wide Area Progressive Operators’ Fees Received From Gaming Entities
        8. Recognition of the WAP Operator’s Liability for Base Progressive and Incremental Progressive Jackpot Amounts
        9. Accounting for Racetrack Fees
        10. Disclosures — Contracts With Customers
        11. Gaming Entity’s Costs to Obtain a Management Contract
    7. 7Health Care Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 2: Identify the Performance Obligations in the Contract
        2. Step 5: Recognize Revenue When (or As) the Entity Satisfied a Performance Obligation
      2. Revenue Streams
        1. Arrangements for Health Care Services Provided to Uninsured and Insured Patients With Self-Pay Balances, Including Co-Payments and Deductibles
        2. Third-Party Settlement Estimates
        3. Risk Sharing Arrangements
        4. Application of FASB ASC 606 to Continuing Care Retirement Community Contracts
      3. Other Related Topics
        1. Application of the Portfolio Approach
        2. Presentation and Disclosure
        3. Accounting for Contract Costs
    8. 8Not-for-Profit Entities
      1. Revenue Streams
        1. Tuition and Housing Revenues
        2. Not-for-Profit Subscriptions and Membership Dues
      2. Other Related Topics
        1. Scope
        2. Bifurcation of Transactions Between Contribution and Exchange Components
    9. 9Software Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 2: Identify the Performance Obligations in the Contract
        2. Step 3: Determine the Transaction Price
        3. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        4. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
    10. 10Airlines
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 2: Identify the Performance Obligations in the Contract
        2. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
      2. Revenue Streams
        1. Interline Transactions — Identifying Performance Obligations for Air Travel (Including at the Segment Versus Ticket Level) and Principal Versus Agent Considerations
        2. Interline Transactions — Loyalty Payments
        3. Brand Name and Customer List in Co-Branded Credit Card Agreements — Timing of Revenue Recognition
        4. Consideration of Significant Financing Component in Advance Mile Purchases Under Co-Branded Credit Card Agreements and Miles in Customers’ Accounts
        5. Regional Contracts
        6. Timing and Classification of Commissions in Interline Transactions
        7. Changes in the Volume of Mileage Credits Under a Co-Branded Credit Card Arrangement
      3. Other Related Topics
        1. Accounting for Contract Costs — Commissions and Selling Costs
        2. Accounting for Passenger Taxes and Related Fees
        3. Accounting for Passenger Ticket Breakage and Travel Vouchers
        4. Accounting for Ancillary Services and Related Fees
        5. Accounting for Change Fees
    11. 11Engineering and Construction Contractors
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 3: Determine the Transaction Price
        4. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      2. Other Related Topics
        1. Disclosures and Presentation
        2. Contract Costs
    12. 12Depository Institutions
      1. Application of the Five-Step Model of FASB ASC 606
      2. Other Related Topics
        1. Sale of Non-Operating Assets (Other Real Estate Owned)
        2. Scope
    13. 13Telecommunications Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 3: Determine the Transaction Price
        4. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
      2. Other Related Topics
        1. Portfolio Accounting
        2. Disclosure and Transition
        3. Accounting for Contract Costs
        4. Miscellaneous Fees
        5. Wireless Transactions Within the Indirect Channel
        6. Material Renewal Rights in Telecommunications Contracts
        7. Contract Modifications
    14. 14Insurance Entities
      1. Other Related Topics
        1. Considerations 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
    15. 15Power and Utility Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        2. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      2. Revenue Streams
        1. Accounting for Tariff Sales to Regulated Customers
        2. Requirements and Similar Contracts With Variable Volumes
        3. Fixed Price Contracts — Consideration of Different Pricing Conventions
      3. Other Related Topics
        1. Accounting for Blend-and-Extend Contract Modifications
        2. Partial Terminations
        3. Treatment of Contributions in Aid of Construction (CIAC)
        4. Income Statement Presentation of Alternative Revenue Programs
    16. 16Time-Share Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 1: Identify the Contract With a Customer
        2. Step 2: Identify the Performance Obligations in the Contract
        3. Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
        4. Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
      2. Revenue Streams
        1. Management Fees
      3. Other Related Topics
        1. Principal Versus Agent Considerations for Time-Share Interval Sales
        2. Contract Costs
    17. 17Hospitality Entities
      1. Application of the Five-Step Model of FASB ASC 606
        1. Step 2: Identify the Performance Obligations in the Contract
        2. Step 3: Determine the Transaction Price
      2. Revenue Streams
        1. Franchise Fees
        2. Hotel Management Service Arrangement
        3. Owned and Leased Property Revenues
    18. 18Entities With Oil and Gas Producing Activities
      1. Application of the Five-Step Model of FASB ASC 606 Revenue Streams
        1. Revenue Streams
      2. Other Related Topics
        1. Derivative Commodity Contracts
        2. Inventories
        3. Joint Operating Agreements
        4. Disclosures
    1. AOverview of Statements on Quality Control Standards
  1. EULA

Product information

  • Title: Audit and Accounting Guide
  • Author(s): AICPA
  • Release date: April 2019
  • Publisher(s): Wiley
  • ISBN: 9781948306546