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In conclusion, the new standards were created for the purpose of creating a comprehensive model for all contracts with customers. These new standards supersede current GAAP in a lot of areas, and could have a significant impact on how we do business here at DRI.

ACCOUNTALYPSE NOW!

July 2016

Vol 100110101001101010, No. 001

When does the standard come into effect?

For both Public & Nonpublic entities

ASU 2014-09 Revenue Recognition

Nonpublic entities

Public Business entities

  • Periods beginning after 12/15/2018
  • Interim reporting periods: 12/15/2019
  • Earlier application allowed 12/15/2016
  • Periods beginning after 12/15/2017
  • Interim reporting periods: 12/15/2017

Raising the Standard of Standards

OBJECTIVE

Identify the customer contract(s)

  • Discuss what ASU 2014-09 Revenue Recognition is and how it may affect our company
  • Begin formulating an action plan for approaching this project
  • Determine next steps

Recognize revenue when (or as) entity satisfies a performance obligation

Identify the separate performance obligations in the contract

5 STEP PROCESS

Determine the transaction price

Allocate the transaction price to separate contract performance obligations

What is different from current GAAP?

What is ASU 2014-09?

Revenue from Contracts with Customers

Questions?

New Guidance

  • Consistent revenue recognition principles
  • Includes cohesive set of disclosure requirements
  • Each performance obligation is identified & revenue is recognized as it is satisfied
  • Allocate transaction price to each performance obligations
  • Single model for variable considerations to be included in transaction price
  • Joint project by FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board)
  • Issued on May 28, 2014
  • Comprehensive revenue recognition model
  • Revenue recognition is an accounting principle
  • Provides conditions for when income can be realized as revenue
  • Replaces industry specific GAAP (generally accepted accounting principles) requirements
  • Example: Credit card purchases
  • Example: Delivery sales

CORE PRINCIPLE

Why was the new standard put into place?

  • To clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS (International Financial Reporting Standards) that would:
  • streamline, simplify & remove inconsistencies
  • provide “a more robust framework for addressing revenue issues”
  • make revenue recognition practices more comparable

Who is affected?

  • This new standard will affect any entity that enters into contracts

with customers unless those contracts are in scope of other standards

Recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

AICPA to the Rescue?

REFERENCES

CONCLUSION

American Institute of CPA's 7 Step Plan

  • Assign team members to become experts
  • Include Accounting, Sales, IA, IT, Legal & HR
  • Perform a gap analysis
  • Determine how to apply new standards retroactively
  • Determine the need for IT system changes
  • Determine interim disclosure needs before full adoption of the new standards take place
  • Develop a project plan
  • Educate and train new standards, new procedures and their impact to the company
  • http://www.fasb.org
  • http://www.aicpa.org/
  • http://www.ey.com/
  • http://www.pwc.com/
  • http://kpmginfo.com
  • http://www.crowehorwath.com
  • http://deloitte.wsj.com/
  • http://www.iasplus.com/
  • http://mcgladrey.com/
  • http://www.protiviti.com/
  • Google Images

CONCLUSION

In conclusion, the new revenue recognition was created for the purpose of creating a comprehensive model for all contracts with customers. These new standards supersede current GAAP in a lot of areas, and could have a significant impact on how we do business here at DRI.

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