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Course Description
This course provides an overview of the new revenue recognition standards prescribed by the Financial Accounting Standards Board (FASB) issued in May 2014. The new standards are effective for public business entities for annual reporting periods after December 1, 2017, including interim periods within that reporting period. For calendar year public filers, these entities will need to implement the new standards starting in 2018.
Instructor
Learning Objectives
Upon successful completion of this course, participants will be able to:
Chapter 1
- Recognize how the new revenue recognition standards were developed between the FASB and IASB
Chapter 2
- Identify the five steps involved in the new revenue recognition model
- Recognize the steps involved in allocating the transaction price to performance obligations
- Identify the considerations involved with measuring the transaction price
- Recognize the considerations involved in identifying whether a contract exists
Chapter 3
- Identify presentation issues with respect to contract assets and contract liabilities
- Understand the overall disclosure requirements and transition methods related to the new standards
Chapter 4
- Recognize key amendments from ASUs issued subsequent to the initial release of the new revenue recognition standards
Table of Contents
Chapter 1 – Introduction
Learning Objectives
Course Overview
Introduction
Why the Change in the Revenue Recognition Standards
Evolution of the Revenue Recognition Standard
Exhibit 1-1: Categories of Feedback from 2011 Exposure Draft
Justification for the Changes
Transaction Price Allocation
Exhibit 1-2: Conclusion on Transaction Price Allocation
Scope of the New Revenue Recognition Standards
Chapter 1 – Review Questions
Chapter 2 – Five Step Process for Revenue Recognition
Learning Objectives
The Main Provisions
Exhibit 1-3: Five Step Process for Revenue Recognition
Step 1: Identify the Contract(s) with a Customer
Approval and Commitment
Identification of Each Party’s Rights
Identification of Payment Terms
Exhibit 1-4: Identification of Payment Terms—Construction Industry (BC39)
Commercial Substance
Probability of Collection of Substantially all of the Contract Consideration
Accounting for Contracts when Criteria is not met
Definition of Customer
Exhibit 1-5: Definition of Customer (BC54)
Combination of Contracts
Portfolio Level vs. Contract-by-Contract Basis
Contract Modifications
Exhibit 1-6: Contract Modifications (BC76)
Step 2: Identify the Performance Obligations in the Contract
Exhibit 1-7: Performance Obligations (BC84 thru 85)
Promised Goods or Services
Exhibit 1-8: Implied Promises (BC87)
Do Promised Goods/Service Represent Performance Obligations?
Exhibit 1-9: Is a Promised Good or Service Distinct?
Exhibit 1-10: When Not to Separate Distinct Goods or Services (BC102)
Step 3: Determine the Transaction Price
Variable Considerations
Exhibit 1-11: Price Concessions (BC194)
Expected Value Method
Most Likely Method
Exhibit 1-12: Estimation Method (BC200)
Constraining Estimates of Variable Consideration
Significant Financing Component
Exhibit 1-13: The Importance of Considering a Significant Financing Component (BC229)
Discount Rate
Exhibit 1-14: Discount Rate Consideration (BC239)
Presentation of the Significant Financing Component
Practical Expedient
Noncash Consideration
Consideration Payable to Customer
Step 4: Allocate Transaction Price to Performance Obligations
Exhibit 1-15: Allocating Transaction Price to Performance Obligations (BC266)
Estimating Standalone Selling Prices
Exhibit 1-16: Suitable Estimation Methods (ASC 606-10-32-34)
Allocating Discounts and Variable Consideration
Changes in Transaction Price
Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
Exhibit 1-17: Consideration of Repurchase Agreements (BC423-424, 426, 428)
Over Time vs. At a Point in Time
Satisfied Over Time
Exhibit 1-18: Alternative Future Use Considerations (BC136)
Measuring Progress
Exhibit 1-19: Input & Output Methods
Satisfied at a Point in Time
Chapter 2 – Review Questions
Chapter 3 – Financial Statement Presentation Issues, Disclosure Requirements, and Transition Guidance
Learning Objectives
Financial Statement Presentation Issues
Contract Assets and Contract Liabilities
Exhibit 1-20: Contract Assets & Contract Liabilities
Costs to Obtain or Fulfill a Contract
Exhibit 1-21: Amortization of Contract Costs (BC309)
Disclosure Requirements
Exhibit 1-22: Board’s View on Existing Disclosure Requirements (BC327)
Contracts with Customers
Disaggregation of Revenue
Exhibit 1-23: Board’s View on Disaggregation of Revenue (BC335)
Contract Balances
Performance Obligations
Transaction Price Allocated to the Remaining Performance Obligations
Significant Judgments
Exhibit 1-24: Board’s View on Significant Judgments (BC355)
Assets Recognized from Costs to Obtain or Fulfill a Contract
Exhibit 1-25: Board’s View on Disclosures for Assets Recognized to Obtain or Fulfill a Contract (BC356 thru 357)
Transition Guidance
Retrospective Application with Practical Expedients
Retrospective Application with Cumulative Effect Recognized in the Current Period
Exhibit 1-26: Retrospective Application with Cumulative Catch-up (BC442)
Early Adoption Considerations
Chapter 3 – Review Questions
Chapter 4 – Recent Developments
Learning Objectives
Recent Developments
ASU 2015-14: Deferral of the Effective Date
Exhibit 1-26: Reasons for Deferral (BC5)
ASU 2016-08: Principal versus Agent Considerations
ASU 2016-10: Identifying Performance Obligations and Licensing
Identifying Performance Obligations
Licensing Implementation Guidance
Exhibit 1-27: Clarifications on Licensing Implementation Guidance (per the FASB)
ASU 2016-12: Narrow-Scope Improvements and Practical Expedients
Assessing the Collectability Criterion
Presentation of Sales Taxes and Other Similar Taxes Collected from Customers
Noncash Consideration
Contract Modifications at Transition
Completed Contracts at Transition
Technical Correction
Chapter 4 – Review Questions
Review Question Answers and Rationales
Glossary
Index
Final Examination
Answer Sheet
Course Evaluation
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