GAAP Flash – ASC 606, CPA Ethics, PCAOB Inspection Reports - 06.09.17
GAAP Flash – ASC 606, CPA Ethics, PCAOB Inspection Reports - 06.09.17

GAAP Flash – ASC 606, CPA Ethics, PCAOB Inspection Reports - 06.09.17

This GAAP Flash includes articles about the impact of ASC 606 on technology and tax departments, Walmart’s new delivery service, the importance of ethics in the accounting field, and an update on the PCAOB meeting last week.

Tech Teams Rush to Catch Up as New Accounting Rule Looms (June 5, 2017) – Wall Street Journal (@WSJ)

As the deadline for the new revenue recognition standards approaches, companies are spending a significant amount of time on processes and technology to ensure compliance. Technology departments are writing new code and updating their accounting systems. Implementation can take up 12 months for large companies. The revenue recognition rule (ASC 606) was scheduled to take effect last year, but the deadline was pushed forward to 2017. However, studies show that many companies still will not complete the necessary upgrades by the end of the year.

How It’s Relevant: Even though the revenue recognition changes were announced years ago, many companies have procrastinated. Compliance with the standards has shown to be a bigger project than anticipated. Changes to contracts, technology, and processes within a company need to be implemented now! GAAP Dynamics has in depth knowledge of ASC 606 and has many resources available to help with understanding the revenue changes. Feel free to contact us with any questions!

 

Walmart tests employee delivery in its battle with Amazon (June 1, 2017) USA Today (@USATODAY)

Amazon has had overwhelming retail success in the digital marketplace. This leaves competitors scrambling to keep up. Because Amazon does not have the same storefront overhead costs, retailers are becoming more creative in their quest to match Amazon’s prices. Two Walmart locations are offering a new delivery service that encourages their employees to make extra money by dropping off packages to customers on their way home from work.

How It’s Relevant: This is a brand-new business plan that has never been tested before. So how will these delivery expenses be booked? Will they be considered wages (subject to payroll taxes) or categorized as shipping and handling costs? Who is liable if the package does not make it to the destination? It will be interesting to see how the strategy pans out. The movement towards internet shopping has posed many challenges to long standing, successful stores. Retailers are thinking outside the box in hopes of keeping up with consumer behavior changes!

U.S. tax and FASB’s new paradigm for revenue recognition (June 1, 2017) – Journal of Accountancy (@AICPA_JofA)

The new revenue recognition standards require more judgment and estimates to be applied than under previous guidance. The revenue amounts that will change due to ASC 606 will directly impact the deferred tax account. Under tax law, income is not included on a tax basis until “all material contingencies on the receipt of income are removed” and the income is considered fixed and determinable.

How It’s Relevant: The impact of the new revenue recognition standards is substantial. The deferred tax accounts will change. Sales and excise taxes will be affected. Investors and owners may see a difference in flow-through income on their personal tax returns! Effectively planning ahead for ASC 606 will help mitigate any surprises in the upcoming years! Our 1-hour training module can help you prepare for the changes that will impact your entire organization.

Accountants Need to Stress Ethics (June 2, 2017) – Accounting Today (@AccountingToday)

The President of the Association of Certified Fraud Examiners spoke at a conference last week, emphasizing that accounting and financial professionals need to prioritize ethics in the workplace. Organizations that do not have good ethical structure and internal controls have a higher potential for fraud.

How It’s Relevant: Business ethics are critical in our profession. If someone is in a situation where they speak to their manager about internal controls not being followed, they may be told to turn a blind eye. The president of the ACFE feels so strongly about the importance of ethics he said, “If the organization you work for does not have the ethical structure you want, it’s time for you to move on. The only way you’re going to be able to stay there is to change your ethical makeup, and that’s not the right answer.” There is a reason ethics courses are required to maintain a CPA license! We need to be unwavering in our commitment to maintaining an ethical environment in our profession.

PCAOB makes major changes to auditor’s report (June 1, 2017) – Accounting Today (@AccountingToday)

In last week’s blog, we wrote about the upcoming PCAOB meeting that looked to pass a new standard identifying “critical audit matters.” It was approved! There are now criteria in place that will help auditors determine what critical issues need to be incorporated in the report. Other changes include more standardized language, consistent formatting, and a disclosure noting the year the auditor began consecutively serving as the company’s auditor.

How It’s Relevant: The confirmation of new guidance being passed is wonderful news! Now auditors will not need to make as many judgment calls, and will know what types of critical matters to include in the report. With a standardized format, it will be easier for readers to find and interpret the information. These are all steps towards a more consistent, enhanced auditor’s report!

Disclaimer
This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

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