brief overview of the new fasb-iasb revenue recognition standard

5/19/2018 Brief Overview of the New FASB-IASB Revenue Recognition Standard

1/20

INCOMING! BRIEF OVERVIEW

OF THE NEW FASB-IASBREVENUE RECOGNITION

STANDARDKurt S. Schulzke, JD, CPA, CFE

Associate Professor of Accounting & Business Law

Coles College of Business

October 2014


2/20

NEW ASC TOPIC 606

Copyright Kurt S Schulzke 2014

ASC =AccountingStandardsCodification


3/20

TOPIC 606ALLEGED (BUTUNPROVEN) PRINCIPLE



4/20

ASC SUBTOPIC 606-10-25-2



5/20

BNAS TOP TEN Industry guidance replaced by legal

opinion & professional judgment

Topic 606 applies across the board &

requires expanded disclosure Transfer of control through satisfaction of

performance obligations is key

One contract may encompass more thanone performance obligation

Collectibility is a scope or contractexistence question, not a measurementquestion

THINGS TO WORRY A New rules require recognition of estimated

consideration if it is probable that subsechanges in the estimate will not require re

Changes to accounting for long-term con

Accounting for license revenue has chan

Allocation of transaction price to performobligations on the basis of stand-alone seno more VSOE of FV

Effective dates


Good high-levelsummary of thestandard but onlypoints to lurkingcontract law questions
http://www.bna.com/fasb-iasb-issued-m17179891012/


6/20

BNAS

HIGH-LEVEL T606 FLOWCH

http://www.bna.com/fasb-iasb-issued-m17179891012/


7/20

ITS ALL ABOUT CONTRACT LAWHTTP://BIT.LY/1SVAZFU


Deeper dicontract la

Topic 606,great flow606 revenrecognitio
http://bit.ly/1sVAZFuhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://bit.ly/1sVAZFu


8/20

ASC Topic 606

SIDE-BY

COMP



9/20

Purported contract w/

customer

STEP 1

Review purported contract

for legal enforceability

and existence

(ED paras. 13 & 15)

Pass ED

paras. 13 & 15

tests?

Enforceability & existence

A. identify governing law & forum

(para. 13);

B. verify contract formation & validity

(para. 13);

C. verify contract enforceability

(para. 13); and

D. for wholly executory contracts,

verify that at least one party lacks the

enforceable right to unilaterally

terminate without penalty (para. 15)

Para. 14 scope criteria

A. commercial substance/effect on future

cash flows;

B. parties approve and are committed to

perform;

C. identification of parties' rights to goods/

services; andD. identification of payment terms

Figure 1

ED/2011/6 Revenue Recognition

Stage 1 - ContractAnalysis

STEP 2Verify contract is within

scope (ED para. 14)

Pass ED

para. 14 tests?

Do not recognize

revenue

No

Yes

No

Yes

Go to Measurement &

Recognition Module(Fig. 2)

Stage 1Contract Analysis

http://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdf


10/20

CONTRACT EXISTENCE& ENFORCEABILITY



11/20

CONTRACT SCOPECRITERIA



12/20

LEISENRINGSLAMENT


In onlaw

jur

docuuncin sta

Henry Rees,

IASBs project

manager

James

Leisenring,

IASB Member

then

representing

the U.S.

Figure 2


13/20

Begin Recognition &

Measurement Module

(a) Identify separate

performance obligations

in the contract

ED paras. 23-30

(b) Determine the

transaction price

ED paras. 50-69

(c) Allocate transaction

price to performanceobligations

ED paras. 70-80

(d) Test for satisfaction

of performance

obligation throughtransfer of good or

service to customer by

shifting contro l

Recognize Revenue

Indicators of customer control

ED paras. 31-48

1. customers unconditional obligation to pay for the good

or service;2. shift of risks and rewards of ownership of goods; or

3. shift in legal title to or physical possession of the goods

Does the customer

control the good or

service?

Yes

No

Figure 2

ED/2011/6 Revenue Recognition

Stage 2Recognition & Measurement

Do not recognize

revenue

Customer must

have the present

right to obtain

substantially all of

the cash flows

from the asset by

using, consuming,

selling,

exchanging,

pledging or holdingit.

ED paras. 31-32.

Transaction price =

expected value or

most likely amount

of consideration to

be received. ED

paras. 52-55

Stage 2

Recognition &Measurement

http://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdfhttp://www.vanderbilt.edu/jotl/manage/wp-content/uploads/schulzke.pdf


14/20

TRANSACTION PRICEEXPECTEDVALUE OR NOT?



15/20

VARIABLE CONSIDERATION



16/20

FILLING GAPS WITH PRIOR GUIDANCE



17/20

DISCLOSUREDISAGGREGATIONREQUIRED



18/20

DISCLOSURE EXAMPLERISK-BASEDDISAGGREGATION (ASC TOPIC 606-10-65-1)

An entity reports the following segments: consumer products, transportation, anaccordance with Topic 280 on segment reporting. When the entity prepares itspresentations, it disaggregates revenue into primary geographical markets, malines, and timing of revenue recognition (that is, goods transferred at a point inservices transferred over time).

The entity determines that the categories used in the investor presentations canmeet the objective of the disaggregation disclosure requirement in paragraphwhich is to disaggregate revenue from contracts with customers into categoriedepict how the nature, amount, timing, and uncertainty of revenue and cash affected by economic factors. The following table illustrates the disaggregatioby primary geographical market, major product line, and timing of revenue recincluding a reconciliation of how the disaggregated revenue ties in with the coproducts, transportation, and energy segments in accordance with paragraph

6.



19/20

DISCLOSURE EXAMPLERISK-BASEDDISAGGREGATION (ASC TOPIC 606-10-65-1)



20/20

PRESENTER

Kurt S. Schulzke, J.D., CPA, CFE

Associate Professor of

Accounting & Business Law

Coles College of BusinessKennesaw State University

Phone: 770.423.6379

[email protected]

Kurt Schulzkeis an Associate Professor of Accounting at KennesawState University and Of Cournsel at Slappey & Sadd, LLC, where herepresents whistleblowers in SEC, IRS and False Claims Act cases.

He delivers seminars on financial reporting, corporate governance,corporate ethics, and family business in major U.S., European andLatin American venues. Kurt is an alumnus of the Harvard Program oNegotiations Teaching Negotiation in the Organizationand theJohannes-Kepler Universitaet - Georgia State University Law SchoolProgram on International Commercial Arbitration .

Prior to joining the Coles College faculty in 1990, Kurt worked for fouryears as an auditor and tax consultant at Price Waterhouse - AtlantaHe has been licensed as a CPA since 1987 and as a member of theGeorgia State Bar since 1998. He has served family-owned businesseas a board member, CFO and general counsel. He holds a J.D. from

Georgia State Universitys College of Law, cum laude, as well as B.S.and M.Acc. degrees from Brigham Young University. He is author ofWorld Accounting, a multi-volume Lexis-Nexis treatise on globalfinancial reporting, and has published articles on accounting andlegal topics in the Journal of Forensic Accounting Vanderbilt Journaof Transnational Law.


brief overview of the new fasb-iasb revenue recognition standard

Documents

new asc topic

new rules

license revenue

brief overviewof

contract lawhttp

contract analysiscopyrigh

contract enforceabilitypara

asc subtopic