ASC 606 Revenue Recognition: Complying with the Revenue Recognition Standards (Completed)
Date: Wednesday, December 2, 2020
Instructor: Lynn Fountain
||9:00am Pacific Time
10:00am Mountain Time
11:00am Central Time
12:00pm Eastern Time
||2 hours for CPAs
Updates and Changes due to COVID
Topic 606 (ASC 606) revenue recognition standard, outlines five steps for proper compliance. There are many considerations that should be considered within each step based on your process and industry. In addition, the recent impact of the Coronavirus has also impacted how companies may evaluate revenue recognition. In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and the International Accounting Standards Board (IASB) issued International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers. Subsequent to the issuance of ASU No. 2014-09, FASB issued the following amendments to provide additional clarification:
• ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date
• ASU No. 2016-08, Revenue from Contracts with Customers – Principal versus Agent Considerations (Reporting Revenue Gross Versus Net)
• ASU No. 2016-10, Revenue from Contracts with Customers) – Identifying Performance Obligations and Licensing
• ASU No. 2016-12, Revenue from Contracts with Customers– Narrow-Scope Improvements and Practical Expedients
The standard affects all entities—public, private, and not-for-profit—that have contracts with customers, except for certain items, which include leases accounted for under FASB ASC 840, Leases; insurance contracts accounted for under FASB ASC 944, Financial Services—Insurance; most financial instruments, and guarantees (other than product or service warranties). In addition, the new standard requires significantly more disclosure than previous generally accepted accounting principles (GAAP).
The potential accounting impacts from the coronavirus have been extensive and from a financial reporting perspective, broad-ranging, affecting among others, a company’s going concern considerations, asset impairment considerations and financial statement disclosures. Yet another critical accounting area that could be affected by COVID-19 is revenue recognition, including revenue recognition internal control processes.
The revenue recognition guidance in ASC Topic 606 provides principles that permit entities to make the judgments necessary to recognize revenue in a manner that reflects the true economics of a transaction stemming from a contract with a customer. Three concepts embedded in the principles that are particularly relevant in the current economic situation are:
• Assessing the ability to collect the consideration promised in a contract
• The requirement for entities to not recognize revenue in excess of what is probable to be reversed in future (a concept otherwise known as the constraint on variable consideration), and
• The accurate measurement of revenue that is recognized over time.
With these in mind, we will identify the revenue recognition areas that could be most susceptible to impact or change, due to the pandemic, as well as evaluate the potential repercussions from these COVID-19 effects.
Who Should Attend
Accountants and Finance professionals, Auditors, Executive management/ Board members and Audit Committee members, and Legal and Compliance professionals.
- Current economic environment and the impact of COVID-19 on the revenue recognition standard
- Revenue recognition core principles
- The five-step revenue model
- The accurate measurement of revenue that is recognized over time
- The revenue recognition areas that could be most susceptible to impact or change, due to the pandemic
- Describe the current economic environment and the impact of COVID-19 on the revenue recognition standard
- Recognize and apply the new revenue recognition core principles and the five-step revenue model
- Describe Step One: Identify the Contract and evaluate the impact of COVID-19
- Describe Step Two: Determine Performance Obligations and evaluate the impact of COVID-19
- Describe Step Three: Determine the Transaction Price and evaluate the impact of COVID-19 on step three
- Describe Step Four: Allocate Transaction Price to Performance Obligations and evaluate the impact of COVID-19 on step four
- Recognize and examine some scenario situations related to COVID-19
NASBA Field of Study
Accounting (2 hours)