Here is a link to the upcoming events including Lease Accounting in March in Santa Clara and August in Manhattan Beach/Los Angeles, CA: http://acslive.com/events/
PwC’s Ashima Jain led off the October version of the Accounting for Leases Conference with an overview discussion. Ashima went on to cover key concepts including:
Identifying a lease
Recognition and measurement
ASC 842 vs IFRS 16
Implications beyond accounting
Ashima is a managing director in PwC’s national office, PwC’s think-tank, providing technical advice and thought leadership on complex accounting matters.
Prior to joining the national office in 2008, Ashima worked in PwC’s Transaction Services Group, a global business unit that provides quality, real-time advice on accounting, financial reporting and valuation implications inherent in a variety of complex transactions. Ashima specializes in merger & acquisition, joint venture, consolidation and lease accounting and focuses on several sectors including technology, entertainment, media, telecom, cable, power, healthcare, real estate, retail, transportation & logistics, etc.
Ashima is a leasing subject matter specialist and has been doing lease accounting for over 15 years. She advises clients in lessor and lessee matters and is a popular speaker at conferences.
Ashima has been closely involved with the new leasing standard. She has attended the FASB/IASB outreach roundtables, is in close touch with the FASB staff and works closely with PwC’s global national office. Ashima has authored several thought leadership papers and presentations, led several roundtables and one-on-one meetings with clients across several regions and sectors helping them navigate through the rules and the implications.
Before her appointment with PwC, Ashima worked in strategic and financial planning in the ocean transportation industry where she advised C-suite executives on strategic initiatives and helped raise $500 million from global sources under tough economic conditions.
Ashima obtained a BS degree in Physics from Bombay University, India, and MBA degree from Indian Institute of Management, Ahmedabad, India’s premier management school set up in collaboration with Harvard. Ashima is a CPA and is based in San Francisco/Bay Area.
Select Testimonials from 2018 Events:
Link to 2018 schedule: Upcoming events
- Very informative! Looking forward to putting this guidance to work! – Analytical Graphics on Revenue Recognition Conference
- It was a good conference, very organized and the speakers were very knowledgeable in their area of expertise. I really enjoyed the specific case studies and examples that walked us through the accounting aspects. – Basic Research on Revenue Recognition Conference
- Overall this conference was great! I liked the multiple examples. Speakers were great at answering questions. Providing research links was great for future reference. – aPriori Technologies on Revenue Recognition Conference
- ACS Conferences just keep getting better and are an excellent value. High caliber speakers, latest topics and great networking.- KNG Consulting on Accounting Update for Tech Companies
- Great conference as always! – Adobe, Inc. on Accounting Update for Tech Companies
- The speakers were great. Very engaging. I enjoyed the real-life examples. – VFP on Accounting for International Operations
- Very Satisfied – Smart Software, Inc. on Accounting for International Operations
- I really enjoyed this conference. It was very relevant for my company and my position. – Universal Forest Products on on Accounting for International Operations
- Well organized, Very informative – Rotork Controls on Financial Accounting & Reporting Update
- Great conference. I look forward to attending again next year. – Essendant on Financial Accounting & Reporting Update
- Great seminar in content, professional knowledge updates and facility/setting. Time is well planned with maximum benefits. – Applied Optoelectronics Inc. on Financial Accounting & Reporting Update
- Excellent Event! – Santen Inc. on Life Science Accounting Update Conference
- Thanks! Awesome job and I learned a great deal – Vets First Choice on Revenue Recognition Conference
- Great information overall. Will definitely re-read and continue to refer to conference materials. – Day and Zimmerman on Revenue Recognition Conference
- Honestly, you hit the mark with the topic line-up. Great blend of relevant topics. – Excentus on Financial Accounting & Reporting Update
- The conference was very good and content are directly impactful to my position.- Twilio on Financial Accounting & Reporting Update
- Loved It! – Southwest Gas Corporation on SOX & Internal Controls Update
- Great conference! – Pivotal Software on SOX & Internal Controls Update
- Second time coming to this conference! Great content and speakers, always interactive and I learn a lot. Made good connections! – Envestnet, Inc. on SOX & Internal Controls Update
- Excellent overall. Glad I chose to participate in this conference. Interactive and engaging speakers. – Encompass Health on SOX & Internal Controls Update
Revenue Recognition New Standard: Key Areas and Examples was presented by Brandon A. Campbell Jr. on June 3, 2016. Brandon Campbell Jr. is a Director in PwC’s Transaction Services accounting advisory practice and regularly addresses various complex accounting matters with clients including revenue recognition, leasing and income tax accounting. Brandon’s most recent experience has been advising companies in regarding the application of the new leasing and revenue recognition standards under both IFRS & US GAAP. Since the issuance of the new leasing and revenue recognition standard, Brandon has been assisting clients with the implementation of the new Standards. Prior to Brandon’s time in Transaction Services, Brandon was in the audit practice of another international accounting firm. Brandon has over 10 years of accounting and auditing experience and has served clients ranging from early stage companies to large multinationals.
Brandon has been focusing on SEC engagements for his entire
professional career. His experience includes accounting advisory, debt
offerings, and quarterly and annual filings with the SEC.
Campbell began his presentation with a five step model of a comparison to existing guidance. He identified step number one as identifying the contracts with a customer. The focus areas of this step include
-may be written, verbal or implied by customary business practices
-Master supply agreements and separate purchase orders for individual orders
His analysis of identifying contracts include
-Some contracts include components that are in the scope of the revenue
standard and other components that are in the scope of other standards. An entity should first apply the separation or measurement guidance in other applicable
standards (if any) and then apply the guidance in the revenue standard.
- To account for a contract to provide leased equipment and product sales, an entity first
applies the separation and/or measurement guidance in the leasing standard to
separate and/or measure the contract price that relates to the equipment lease,
including the related executory costs and profits thereon.
- The guidance in the revenue standard is then applied to the sale of product component
of the contract.
Campbell identified step two as identifying the performance obligations in the contract. The focus areas of this step include
-Implied performance obligations
-Loyalty point programs
-Renewal options and upfront fees (material right)
-Minimum purchase orders- stand ready obligation
-Free goods and other marketing incentives
-Shipping and handling- risk of loss service
-Options to acquire additional goods and services
Warranties and other post -delivery obligations
The speaker identified step three of the comparison to existing guidance as determining the transaction price. The focus areas of step three include
-Time value of money
-Tiered pricing and volume discounts
-Rights of return
-Significant financing component -extended payment terms
-Profit Margin Guarantees
Campbell identified step four as allocating the transaction price to the performance obligations. He presented the key focus areas of this step which include
-Allocate based on relative standalone (actual or estimated) selling price
-No contingent revenue/cash cap
Campbell identified the final step as recognizing revenue when the entity satisfies a performance obligation. The key focus areas of step five include
-Determination of over time versus at a point in time
-Contract Manufacturing –no alternative use
-FOB synthetic Destination -shipping terms, change of control
Campbell continued the presentation with a discussion on the 3rd criteria of recognizing revenue which is no alternative use and right to payment. He discussed a deeper look into the 3rd criteria which includes
-The assessment of alternative use should be made at inception and not reassessed.
-The right to payment should include consideration of the contract terms and any legal precedent.
The speaker concluded the presentation with a discussion on implementation challenges by displaying data predicting the GAAP changes as a result of the new standards from 2016 to 2019.
Revenue Recognition: Tax Impact of the New Standard was presented by Mary Duffy of Andersen Tax in Washington DC and Jessica Hawn of Andersen Tax in Chicago. In this presentation, the speakers summarized the tax impact of the new revenue recognition standard with a discussion on tax principles for revenue recognition, revenue recognition examples, and key tax implications of the new standard.
The presentation began with an opening question, “Why does tax matter?” as well as several answers such as
-Tax rules generally do not follow the GAAP rules.
– Changes to the accounting for book purposes may identify or generate a need to make a change in method of accounting for tax purposes or impact the computation of the Schedule M (book/tax difference) or impact deferred tax assets/liabilities
The speakers discussed tax principles for revenue recognition including
- Sale of goods -Revenue is generally earned when the benefits and burdens of ownership pass to the customer
- Services –Revenue is generally considered recognized when the performance of services is complete
- Licenses –Over the period the licensee has the right to use the property
- Long term contracts –As costs are incurred
They continued by discussing advanced payments which are generally taxable upon receipt and have limited deferral allowed. They also provided information on long-term contracts and tax treatment of contract inducement costs which are generally capitalizable for tax purposes only to the extent all of the below are met:
- External costs (not internal labor/overhead)
- Contract term exceeds 12 months
- Contract is not terminable at will
- Amount is not de Minimis ($5,000 Or less)
The presentation provided examples of revenue recognition such as separate performance obligations and advanced payments, contingent consideration and long term contracts.
The speakers continued presenting with a discussion on key tax implications of the new standard.
This included the impact on cash taxes such as the potential acceleration of taxable income
-Advanced Payments under Rev. Proc. 2004 -34 or Treas. Reg. sec. 451 -5
- Deferral in the year of receipt limited to the extent of deferral for financial reporting purposes
- Generally, tax deferral CANNOT exceed deferral for financial reporting purposes
- Book income change forces tax income change
This also included the changes in tax accounting methods such as
-Generate a need to change tax accounting methods
-Analysis of new revenue recognition standard may highlight a need to change tax accounting methods
-Cumulative catch -up adjustments (section 481 (a) adjustments)
-Voluntary change from Proper accounting methods -Automatic
The speakers spoke on creating or changing existing temporary differences and changes in accounting for income taxes such as the cumulative effect adjustment on adoption.
Duffy and Hawn concluded the presentation by discussing tax impacts: get plugged in now. The speakers encourage the audience to
Get plugged in as soon as possible to ensure input into:
- Potential changes to systems needed to capture data for tax
- Potential changes in book accounting that may
- Create book/tax differences
- Inadvertently result in a change in accounting method (without IRS consent)
- Require obtaining IRS consent to change from prior book -driven method to an alternative method
You can see all upcoming events here: Upcoming events
SEC update was presented on June 3, 2016 by David Lynn from Morrison Foerster. This presentation begins with the opening question, “Is the Staff still reviewing filings?”. The presentation provides an answer to the question giving these following reasons for why comment letters are down around 30%.
- The Staff has worked on the efficiency of the comment process, particularly through the efforts of the Office of Disclosure Standards;
- The Staff is more focused from an industry perspective;
- The transparency of the comment process has increased to the point where issuers can readily anticipate issues; and
- The back and forth in the comment process has been decreasing
The presentation continues on the topic of Non-GAAP measures as discussed by the Staff including
- The Staff has said that they will focus on companies using non -GAAP measures to accelerate the recognition of revenue earlier than allowed under GAAP
- The Staff will also challenge companies reporting adjusted earnings on a per share basis when they appear to look to much like measures of cash flow
- It is also expected that the Staff will comment when companies “cherry-pick” non-GAAP measures
- The Staff recently updated the Non -GAAP Measures Compliance and
Disclosure Interpretations to reflect a number of new and revised interpretive positions
A list of non-GAAP presentations that could be misleading are listed in this presentation such as
- A performance measure that excludes normal, recurring, cash operating expenses necessary to operate the business
- A non-GAAP measure that adjusts a particular charge or gain in the current period and for which other, similar charges or gains were not also adjusted in prior periods, unless the change between periods is disclosed and the reasons for it explained.
The presentation continued by providing examples of non-GAAP presentations that fail to give “equal or greater prominence” to the comparable GAAP measure as well as the disclosure of tax effects on non-GAAP measures.
The second topic covered by the SEC update was SEC comments: Revenue Recognition. This section of the presentation touched on SAB topic 11.M disclosures, requirements for revised financial statements, consistency of filings versus elsewhere, cybersecurity disclosure, little “r” and big “R” restatements, and typical revenue recognition comment areas such as
-gross versus net reporting
-software revenue recognition
-service revenue recognition
-principal vs. agent transactions
-Revenue recognition for long-term construction and production contracts
The presentation provides the following information on audit committee disclosure.
- Over the past four years, there has been a substantial increase in attention to the role played by the audit committee of the board of directors and the audit committee-auditor relationship.
- Several groups have noted the importance of the audit committee and its oversight responsibilities with respect to the auditor, while at the same time citing a lack of transparency about this relationship and the overall role that the audit committee plays within the issuer.
- In 2015, the SEC issued Rel. No. 33-9862, a concept release soliciting comment on many of the audit committee/auditor disclosure concepts that have been “encouraged” over the past few years.
The SEC update continues by answering what Magnum Hunter Resources case can tell the audience about internal controls and concludes with the closing question, “What are the latest practices regarding related party transaction disclosures?”. To answer this question, the audience is provided with information regarding the Auditing Standard No.18 which deals with related party transactions, significant unusual transactions, and a company’s financial relationships and transactions with its executive officers. The answer is also found when discussing related party transactions, related party lists, and related databases.
We are hosting a two day conference covering all aspects of the new rules in San Jose, CA on March 21-22, 2017: http://acslive.com/event/leases_sanjose_march2017/
See all upcoming live conferences and live accounting conferences here: 2016 Schedule
The New Lease Accounting Standard was presented by BD’s Hank Galligan on June 14, 2016. This presentation had three learning objectives.
- To identify the main provisions of the new lease standard as contrasted with prior accounting requirements
- To identify financial statement presentation and disclosures required by the new lease standard
- To recognize operational impact of the new standard
The presentation begins by providing information on Scope and identifying a lease based upon
- Whether contract fulfillment depends on use of an identified asset
- Whether contract conveys right to control use of identified asset for consideration for a time period
The presentation looks further into identifying a lease by identifying the five criteria for lease classification as seen below.
- Transfer of ownership of underlying asset to lessee by end of lease term
- Option to purchase underlying asset that lessee is reasonably certain to exercise
- Lease term = major part of remaining economic life of underlying asset
- Sum of PV lease payments and PV any residual value guaranteed by lessee ≥ substantially all of the FV of underlying asset
- Underlying asset is of such a specialized nature that it is expected to have no alternative use to lessor at end of lease term
The discussion on leases further with the information on topics such as lease terms, lease payments, and lease modification.
It is then shown how Lessee accounting demonstrates the decrease of lease expenses over nine years. The presentation moves on to Lessor Accounting and its initial and subsequent measurements of sales-type, operating, and direct financing leases. Other considerations of variable lease payments are mentioned such as
- Impairment of net investment
- Modifications – change in lease type
- Leveraged leases
- Alignment of principles with Topic 606
Lessee disclosures are provided including
- Contractual details (lease term, contingent rentals, options, etc.) and related accounting judgments
- Information about significant leases that have not yet commenced
- Amounts related to lease cost (including any amounts capitalized) and related cash flows, separately for operating and finance leases
- If practical expedients related to short-term leases and separation of lease and non-lease components elected, disclose that fact and related details
Lessor disclosures mentioned include
- Contractual details (lease term, contingent rentals, options, etc.) and related accounting judgments
- Narrative disclosures about leases (including information about variable lease payments and options)
BDO Knowledge concludes the presentation by speaking on Lessee and Lessor Accounting transitions as seen below as well as transition considerations.
- Modified retrospective approach with hindsight allowed for evaluating renewal and purchase options on existing leases. No option for full retrospective.
- Significant relief provisions allowed as a policy election – No reassessment of:
- – Whether any expired or existing contracts are or contain leases
- – Classification for any expired or existing lease
- – Initial direct costs for expired or existing leases
- Considerations of planning to transition has an impact on ICFR, Planning and budgeting, Taxes, Compensation arrangements, Debt covenants and other contracts, Internal and external communication, IT systems/data management, and Lease structure strategy.
You can see all upcoming CPE training events – including other revenue recognition conferences: Upcoming Events
This Revenue Recognition Overview was presented by Shauna Watson on June 2, 2016 in Philadelphia, PA.
Shauna Watson is the Global Managing Director of Finance & Accounting at RGP.
The speaker discusses the effects of the new Revenue Recognition Standards such as
-It eliminates all industry-specific guidance,replacing it with one Standard,
– specific accounting may have the most difficulty with implementation
– All companies that enter into contracts with customers to transfer goods, services or Nonfinancial Assets.
Watson presented key provisions such as
-The Objective is to converge standards and provide a single, high
quality standard to recognize revenue consistently across entities and jurisdictions
-It Replaces existing revenue guidance in US GAAP and IFRS
-If the criteria are not met, the contract is not accounted for using the five step method in the new standard and any consideration received from the customer is generally recognized as a liability
The speaker continued to speak on collectability which refers to a customer’s intent and ability to pay the amount of promised consideration when it is due. She argued the criteria of cash basis collectability.
For consideration received prior to existence of a contract (i.e. meeting all Step 1 criteria), recognize as a liability until:
- The contract been terminated and the consideration received is nonrefundable.
- b) There is no remaining performance obligations and all, or substantially all, of the consideration been received and is nonrefundable.
- c) The entity has transferred control of the goods or services and stopped transferring additional good or services (with no obligation to transfer additional goods or services), AND the consideration received is nonrefundable.
Watson spoke about identifying separate performance obligations in contracts which includes a good or service’s benefit on its own and a good or service’s readily availability, customer options for additional goods and services, and warranties.
She also discussed allocating transaction prices to separate performance obligations such as estimating standalone selling prices by considering the expected cost plus a margin approach.
Watson closed her presentation with a discussion on recognizing revenue as performance obligations are satisfied. This includes
-Recognizing revenue overtime has an objective to select an appropriate method to measure progress toward completion of the performance obligation in a manner that best depicts the transfer of goods or services to the customer.
– Recognizing revenue at a certain point in time allows the customer to have an unconditional or present obligation to pay, have a legal title, and have the physical possession.
You can see all upcoming similar training events here – including other Revenue Recognition Accounting Conferences: Upcoming Training Conferences
Discussion Leader Info:
Pavel Katsiak presented Transition Issues: Systems and Processes on June 2, 2016 at the Revenue Recognition Accounting Conference in Philadelphia
. Pavel Katsiak is a Director at PWC and located in Washington DC.
-Pavel has served PwC audit and non audit clients for over 10 years.
-Pavel specializes in helping clients evaluate the accounting and reporting implications of the new revenue recognition standard.
-His combination of audit background and understanding of technical requirements of the new standard brings a practical perspective to the new revenue recognition implementation.
-Pavel’s clients include companies in industrial products, retail and consumer, technology, entertainment and media and services industries.
Katsiak began his presentation with an explanation that the effects of transition issues extend beyond accounting and continued by discussing an approach to implementation in three phases as listed below.
- Impact Assessment: Assess impact and determine strategy.
- Conversion: Establish policy and prepare initial financial results.
- Embedding: Embed as the primary revenue standard.
The speaker displayed implementation challenges including
- Centralized or dispersed business units
- Cross-functional communication and education
- Diversity of terms and conditions
- Tax implications
The speaker provided data supporting that in the Revenue Recognition Survey of 2015, 30% of respondents said their systems are centralized in one location; 21% said systems are somewhat centralized in a few locations. Of respondents who answered the question, 77% said they expect to make some to significant changes to IT or ERP systems. Furthermore, 84% believe implementing a parallel reporting system will take at least 6 months 59% expect they need a parallel reporting system and 87% of respondents anticipate some change in their internal controls 55% do not expect to make significant changes to their business models.
He discussed some changes that would need to be made as a result of the Revenue Recognition System such as
-New data may be needed from:
Ordering systems, Quoting systems, Contracting systems, Billing and invoicing systems, Cash and treasury processes, Licensing operations, and CRM.
Katsiak’s presentation displayed a list of expected master and transition data sets that will be impacted by topic 606 such as
- Volume licensing offer
- Contract (MPSA, PAR agreement)
- GL posting for revenue adjustments
The speaker spoke on the expected functionality of revenue automation capabilities for Topic 606. The expected functionalities include
- Analysis of historical sales data to determine SSP (stand alone selling price)
- Link related transactions into single contract
- Break out of performance obligations
- Booking of contract asset
- Relative allocation method
- Accounting for contract modifications
- Ability to “turn off” contingent revenue limitation
- Dual reporting
- Reporting based on adjusted revenue
Katsiak concluded his presentation with Build vs. Buy considerations of the Revenue System as listed below.
-In house experience on systems, data, revenue
Transactions and expected results
-Requires in-house specialized revenue accounting
and technical expertise and skillsets to build a
scalable system and continually update to adapt to
changes in a timely manner
-Consider time required to build.
-Solution providers will need to learn client’s systems,
data and requirements, and may not gain full knowledge
-Experienced solution providers are subject matter
experts in technical revenue accounting and
related systems. They are expected to continue
investing in their solutions to improve.
-Consider availability and long term viability of
vendor solutions and their resources to implement
From presentation given on Dec 15-16 at Philadelphia Hyatt Bellevue
Financial Accounting & Reporting Update Conference
See similar upcoming CPE Conferences here: 2016 Schedule of CPE Conferences by ACS
By Dave Christensen of RGP: As a Managing Consultant at RGP, Dave works as a part of RGP’s client service team focusing on the delivery of multiple engagements in support of its advisory services. He has extensive US GAAP expertise and is currently focused on revenue recognition efforts. Prior to joining RGP in 2015, Dave spent 9 years with United Services Automobile Association (USAA) as the Assistant Vice President of Accounting Policy and External Reporting, 3 years with GE Insurance as the Lead Technical Accounting Advisor, 5 years at the National Association of Insurance Commissioners as the Statutory Accounting Principles Manager and 6 years as an audit manager at Deloitte & Touche.
FASB Announces new rules: link to FASB website announcement
Dave began the presentation with an executive summary of the long history, impetus and background of the FASB project.
For lessees: most leases will be on the balance sheet
Leases will be classified into two types: Type A- similar to today’s capital leases and Type B- similar to today’s operating leases
Income statement recognition pattern will depend on lease type
For Lessors: Type A – similar to today’s sales type of direct financing leases (initial selling profit deferred if lessor does not transfer control) Type B leases similar to today’s operating leases
Leveraged lease model is eliminated
David continued with a deeper dive into the scope and definition of leases, lease identification, identified asset, short-term leases, separating lease and non-lease components, contract combinations, portfolio approach, lease terms, lease payments, discount rates, implicit interest examples, economic life, fair value, lease classification, lessee accounting, disclosures and examples.
See similar upcoming CPE Conferences here: 2016 Schedule of CPE Conferences by ACS
See all upcoming live training CPE events here – including SOX training: 2016 Schedule
Presented by: Scott Laliberte is Protiviti’s Managing Director leading the firm’s Vulnerability and Penetration Testing Solution, and is one of three Managing Directors that reviews and approves all of Protiviti’s PCI reports on compliance. Laliberte has been with Protiviti since the start of the firm in 2002 and has more than 20 years of experience in information technology risk and security consulting. He is a published author and accomplished speaker. He has security expertise in numerous industries including financial services, retail, hospitality, healthcare, higher education, manufacturing, and consumer packaged goods.
Scott led off the presentation with a discussion of current events including statistics on date breaches.Board Engagement is key:
One in three companies do not have a written information security policy. There are critical gaps in data governance and management, and ones that carry considerable legal implications. On the other hand, organizations with all of these key data policies in place have far more robust IT security environments and capabilities.
Lack high confidence in ability to prevent cyber attack or data breach
Not all data is equal
Many are unprepared for a crisis
Common attacks include:
phishing and spear fishing
attacks through third parties
they are gathering data for id theft and profit
stealing intellectual property