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Course Details

Revenue Recognition: The New Guidelines - v07 (Course Id 1306)

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Author : Jae K. Shim, Ph.D., CPA
Status : Production
CPE Credits : 6.0
IRS Credits : 0
Price : $59.95
Passing Score : 70%
NASBA Technical: Yes
Primary Subject-Field Of Study:

Accounting - Accounting for Course Id 1306

Description :

In 2014, after years of deliberations, the Financial Accounting Standards Board (the FASB) and the International Accounting Standards Board (the IASB) jointly issued the Accounting Standard Update (ASU) No. 2014-09 (codified primarily in ASC 606) and IFRS 15, respectively. ASC 606, the new revenue standard, replaces virtually all (including industry-specific) U.S. GAAP revenue guidance with a single model. The standard not just changes the amounts and timing of revenue but potentially affects organizations financial statements, business processes and internal control over financial reporting. The standard also affects other related accounting topics such as contract modification, rights of return, licensing, principal-versus-agent considerations, and income tax. Moreover, the standard creates new and expanded disclosure requirements.

In light of the new revenue standard, organizations need to reassess their current revenue accounting processes and systems and implement changes required to maintain compliance with the new guidance. This course reorganizes the guidance contained in ASC 606, to follow the five-step revenue recognition model along with other guidance impacted by this standard. It also provides examples to illustrate the application. The course is designed to help you navigate the complexities of this standard, identify the implications of it, and prepare for implementation. It also shares insights to help you evaluate the effect of required changes to the internal control environment. It provides a working knowledge of the fundamentals of revenue standard that can be applied, regardless of the company size, in the real world.

Usage Rank : 0
Release : 2017
Version : 1.0
Prerequisites : General Accounting.
Experience Level : Overview
Additional Contents : Complete, no additional material needed.
Additional Links :
Advance Preparation : None.
Delivery Method : Self-Study
Intended Participants : Anyone needing Continuing Professional Education (CPE).
Revision Date : 21-Dec-2017
NASBA Course Declaration : Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam.
Approved Audience :

NASBA QAS - NASBA Registry - 1306

Keywords : Accounting, Revenue, Recognition, New, Guidelines, v07, cpe, cpa, online course
Learning Objectives :


Course Learning Objectives

Upon completion of this course, you will be able to:
  • Recognize the improvements over the revenue accounting through the release of ASC 606
  • Cite the key changes of the revenue recognition practice compared to former ASC 605
  • Recognize the impact of the revenue standard on the organizations
  • Identify the applicability of the revenue standard
  • Recognize the challenges and impacts related to each transition method
  • Recognize the key concepts of the revenue recognition model
  • Identify the difference between U.S. GAAP and IFRS affecting the revenue recognition practice
  • Recognize the steps involved in implementing the new revenue guidelines
  • Identify the presentation and disclosure requirements
  • Identify the potential impact upon adoption of new revenue guidelines
  • Recognize the requirements for other revenue topics (e.g. warranties, principal-versus agent, licensing)
  • Recognize the indicators for potential misstated revenue recognition
  • Identify control activities that reduce risk of misstatement in revenue
Course Contents :

Chapter 1 - Revenue Recognition: The New Guidelines

Part I -    The Fundamentals of the Revenue Standard

Rising to the Challenge

The Need to Issue the New Guidance

The Significant Improvement for Revenue Accounting

Key Changes of Revenue Recognition Practice

Applicability

In Scope

Out of Scope

Collaborative Arrangements

Practical Expedients

Transition Guidance

Effective Date

Transition Methods

Full Retrospective Adoption

Modified Retrospective Adoption

The Impact of Each Transition Method

Consideration for SEC Registrants

Exhibit A: Ford Motor Company Quarterly Report - Notes to the Financial Statements

Key Concepts of the Standard

Attributes of a Contract

Essence of a Performance Obligation

Determination of the Transaction Price

Allocation of the Transaction Price

Recognition of Revenue

Transfer of Control

Satisfaction of Performance Obligation

Measures of Progress

Significant Impacts

More Efforts to Determine the Contract Existence

Differing Revenue Streams and Related Activities

The Revenue Transactions

Tax Implications

General Considerations

Additional Estimates and Judgment

More Comprehensive Presentation and Disclosure Requirements

Practices of Certain Industries

Real Estate

Entertainment and Media

U.S. GAAP vs. IFRS

Section 1 - Review Questions

Part II: The Application of the Revenue Recognition Model

Step 1: Identify the Contract with a Customer

Required Criteria - Contracts with Customers

Approval and Commitment

Rights

Payment Terms

Commercial Substance

Collectibility of the Consideration

Reassessment of Criteria

Combining Contracts

Modifying Contracts

Definition of a Contract Modification

Types of Contract Modifications

Modification Accounted for as a Separate Contract

Modification Accounted for Prospectively

Modification Accounted for as Part of the Original Contract

Step 2: Identify the Performance Obligations

Identification of Promises in a Contract

Determination of Distinct Goods or Services

Section 2 - Review Questions

Step 3: Determine the Transaction Price

Components of the Transaction Price

Variable Consideration

Forms of Variable Consideration

Estimating Variable Consideration

Constraint on Variable Consideration

Significant Financing Component

Noncash Consideration

Consideration Payable to a Customer

Step 4: Allocate the Transaction Price to the Performance Obligations

Definition of Standalone Selling Prices

Estimating Standalone Selling Prices

Adjusted Market Assessment Approach

Expected Cost Plus a Margin Approach

Residual approach

Allocating Discounts

Allocating Variable Consideration

Changes to the Transaction Price

Step 5: Recognize Revenue

Transfer of Control

Satisfaction of Performance Obligations

Performance Obligations Satisfied Over Time

Measures of Progress over Time

Section 3 - Review Questions

Part III: Other Revenue Topics

Contract Costs

Costs to Obtain a Contract

Costs to Fulfill a Contract

Sale with a Right of Return

Accounting for Warranties

Principal versus Agent Considerations

Definitions of Principal and Agent

Principal and Agent Indications

Indicators of Principal

Indicators of Agent

Section 4 Review Questions

Licensing

Scope of the Licensing Guidance

Determining Whether a License Is Distinct

Determining the Nature of a Distinct License

Symbolic Intellectual Property (Right to Access)

Functional Intellectual Property (Right to Use)

Determining Whether Contractual Provisions Represent Attributes of a License or Additional Rights

Sales- or Usage-Based Royalties

Other Considerations

Customer Options for Additional Goods or Services

Nonrefundable Upfront Fees

Repurchase Agreements

Forward or Call Option

A Put Option

Consignment Arrangements

Bill-and-Hold Arrangements

Presentation and Disclosure

Presentation

Statement of Financial Position

Contract Asset vs. Receivable


Disclosure

General Considerations

Disclosure for Public Entities

Contract with Customers

Disaggregation of Revenue

Contract Balances

Performance Obligations

Exhibit B: Disaggregation of Revenue - Quantitative Disclosure

Significant Judgments

Assets Recognized from the Costs to Obtain or Fulfill a Contract with a Customer

Practical Expedients

Disclosure for Nonpublic Entities

Contracts with Customers

Disaggregation of Revenue

Contract Balances

Performance Obligations

Significant Judgements

Assets Recognized from the Costs to Obtain or Fulfill a Contract with a Customer

Part IV Implication to Internal Controls

Responsibilities of SEC Registrants

The Role of Internal Control over Financial Reporting

Regulatory Compliance

SOX Section 404

SOX Section 302

Considerations

Exhibit C: Ford Motor Company Quarterly Report - Item 4. Controls and Procedures

Section 5 Review Questions

Design and Implementation of Controls

Control Environment

Risk Assessment

Control Activities

Revenue Recognition Process

Identify the Contract with a Customer

Identify the Performance Obligations

Determine the Transaction Price

Allocate the Transaction Price

Recognize Revenue

Estimation Process

Information and Communication

Monitoring

Section 6 Review Questions

Glossary


Table of Examples

Applicability

Example 1: Identifying the Customer Collaborative Arrangement

Transition Guidance

Example 2: Apply the Modified Retrospective Method

Significant Impacts

Example 3: Sales of Real Estate

Step 1: Identify the Contract with a Customer

Example 4: Assessing the Existence of a Contract - No Written Sales Agreement

Example 5: Collectibility of the Consideration

Example 6: Consideration Is Not the Stated Price - Implicit Price Concession

Example 7: Reassessing the Criteria for Identifying a Contract

Example 8: Contract Modifications - Unpriced Change Order

Example 9: Modification of a Contract for Goods

Example 10: Modification of a Services Contract

Example 11: Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue

Step 2: Identify the Performance Obligations in the Contract

Example 12 A: Determining Whether Goods or Services Are Distinct

Example 12 B: Goods and Services Are Not Distinct

Step 3: Determine the Transaction Price

Example 13: Variable Consideration - Price Concessions

Example 14: Estimating Variable Consideration - Performance Bonus with Multiple Outcomes

Example 15: Constraining Estimates of Variable Consideration

Example 16: Significant Financing Component

Example 17: Entitlement to Noncash Consideration

Example 18: Consideration Payable to a Customer

Step 4: Allocate the Transaction Price to the Performance Obligations

Example 19: Estimating Standalone Selling Price - Residual Approach

Example 20: Allocating a Discount

Example 21: Allocating Variable Consideration

Example 22: Allocating Transaction Price - Change in Transaction Price

Step 5: Recognize Revenue

Example 23: Customer Simultaneously Receives and Consumes the Benefits

Example 24: Customer Controls the Work in Progress

Example 25: Assessing Alternative Use

Example 26: Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or Over Time

Example 27: Selecting the Measures of Progress

Example 28: Customer Has Physical Possession with No Control of An Asset

Contract Costs

Example 29: Incremental Costs of Obtaining a Contract

Example 30: Costs to Fulfill a Contract

Sale with a Right of Return

Example 31: Right of Return

Accounting for Warranties

Example 32: Warranties

Principal versus Agent Considerations

Example 33: Determining Whether an Entity is the Principal or an Agent

Licensing

Example 34: Determining Whether Goods or Services Are Distinct

Example 35: Right to Access Intellectual Property

Example 36: Right to Use Intellectual Property

Example 37: Determining Whether Contractual Provisions Represent Attributes of a License or Additional Rights

Example 38: Sales-Based Royalty

 

Table of Illustrations

Illustration 1 When Contract Criteria Not Met

Illustration 2: Accounting for Contract Modification

Illustration 3: Determining Standalone Selling Price

Illustration 4: Satisfaction of Performance Obligations

Illustration 5: Accounting for Incremental Costs

Illustration 6: Accounting for Contract Fulfill Costs

Illustration 7: Determination of Types of Warranties

Illustration 8: Determination of Right to Access or Right to Use

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