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More About This Title Revenue Recognition 2016
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This publication addresses key accounting implementation issues related to Topic 606, Revenue from Contracts with Customers and related updates through FASB ASU No. 2016-12. At its completion, the guide will include 16 industry-specific chapters that address accounting implementation issues, and provide industry- specific illustrative examples of how to apply the new standard. It will also provide in-depth coverage of audit considerations from risk assessment and planning to execution of the audit.
In light of the material changes resulting from this standard, it will require significant analysis and preparation well in advance of the effective date for all financial reporting based on US GAAP. For that reason, the AICPA is offering two options to quickly deliver finalized implementation issues as quickly as possible. Those options include:
- an annual online subscription available via our online professional library, or
- combination print/PDF, which includes completed chapters as of January 2017 in print as well as online PDF access to finalized implementation issues.
Accounting and auditing content of this guide will be updated as implementation issues are finalized, and can be tracked via the link below.
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Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting professional nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups, and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession's technical and ethical standards.
The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public trust.
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Introduction .01-.03
Authoritative Status and Effective Date .04-.12
Transitioning to the New Standard .09-.12
Post-Standard Activity .13-.15
Overview of FASB ASU No2014-09, Revenue from Contracts with Customers .16-.33
Step 1: Identify the Contract with a Customer .18-.20
Step 2: Identify the Performance Obligations in the Contract .21-.24
Step 3: Determine the Transaction Price .25-.26
Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract .27-.29
Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation .30-.33
Costs to Obtain or Fulfill a Contract With a Customer .34-.38
Incremental Costs of Obtaining a Contract .34-.35
Costs of Fulfilling a Contract .36-.38
Disclosures .39-.40
Other Topics .41-.52
Presentation of Contract With a Customer .41
Sale With a Right of Return .42
Warranties .43
Principal versus Agent .44
Customer Options for Additional Goods or Service—Material Rights .45
Customer’s Unexercised Rights .46
Nonrefundable Upfront Fees .47
Licensing .48
Repurchase Agreements .49
Consignment Arrangements .50
Bill-and-Hold Arrangements .51
Customer Acceptance .52
2 General Auditing Considerations .01-.206
Introduction .01-.05
Auditing the Five-Step Model of FASB ASC 606 .06-.41
Step 1: Identify the Contract(s) With a Customer .08-.15
Step 2: Identify the Performance Obligations in the Contract .16-.23
Step 3: Determine the Transaction Price .24-.31
Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract .32-.38
Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation .39-.41
Auditing Considerations in the Adoption and Transition to FASB ASC 606 .42-.54
General Audit Considerations Over Revenue Recognition .55-.66
Risk Assessment and Fraud Risk Under FASB ASC 606 .67-.100
Audit Planning .68-.69
Assignment of Personnel and Supervision .70-.71
Establishing an Overall Strategy .72
Audit Risk .73-.76
Understanding the Entity and Risk Assessment .77-.84
Inquiry .85-.86
Reading and Understanding Contracts .87
Reviewing Process Narratives and Process
Flow Diagrams .88
Reviewing Internal Control Manuals, Policy Manuals, or Similar Documentation .89-.90
Discussion Among the Audit Team .91
Assessing the Risks of Material Misstatement .92-.93
Identification of Significant Risks .94-.100
Specific Audit Considerations Over Revenue Recognition .101-.111
Side Agreements .101-.102
Channel Stuffing .103
Related-Party Transactions .104-.108
Significant Unusual Transactions .109
Nature of Business and Accounting for Revenue .110-.111
Potential Accounting Misstatements .112-.120
Identify the Contract With the Customer .114-.115
Identify the Performance Obligations in the Contracts .116
Determine the Transaction Price .117
Allocate the Transaction Price to the Performance Obligations .118
Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation .119-.120
Consideration of Fraud as it Relates to Revenue .121-.128
Discussion Among Engagement Personnel Regarding the Risks of Material Misstatement Due to Fraud .126-.127
The Importance of Exercising Professional Skepticism .128
IFRS 15 Versus FASB ASC 606 .129
The Role of Controls Over Financial Reporting in Revenue Recognition .130-.147
Control Environment .132-.137
Risk Assessment .138-.141
2 General Auditing Considerations—continued Control Activities .142-.143
Information and Communication .144-.145
Monitoring .146-.147
Obtaining Audit Evidence .148-.176
Types of Substantive Procedures .151-.158
Potential Issues in Obtaining Audit Evidence .159
Audit Evidence Related to the Five Steps of Revenue Recognition Under FASB ASC 606 .160-.176
Auditing Estimates .177-.181
Potential Area of Focus—Management Bias .180-.181
Management Representations .182-.186
Independence .187-.196
Consultation .189-.191
Situations in Which Auditors Can Assist During Transition .192-.196
Disclosures .197-.198
Smaller Entities .199
Audit Documentation .200-.206
Appendix A Overview of Statements on Quality Control Standards
