GAAP Flash – ASC 606, ethics, and the PCAOB – 08.18.17
GAAP Flash – ASC 606, ethics, and the PCAOB – 08.18.17

GAAP Flash – ASC 606, ethics, and the PCAOB – 08.18.17

This week’s GAAP Flash includes articles about the impacts of adopting ASC 606 within both the digital subscription industry and the retailer industry, ACCA’s study on how ethics are more important than ever within the digital age, and the PCAOB chairman agreeing to continue his term.

Yes, it's accounting, but ASC 606 could have a huge impact on your company (August 10, 2017) – Forbes (@Forbes)

This article serves as another reminder that the new revenue recognition rules (ASC 606 and IFRS 15) have the potential to impact everything when it comes to revenue: sales, go-to-market strategies, compensation plans, product roadmaps, systems, processes, disclosures, etc. Additional considerations for companies within the digital subscription industry are discussed, including the frequency of changes to subscription contracts as well as the types of subscription contracts. The impacts on this specific industry are significant and time is running out!

How It’s Relevant: People are saying that ASC 606 is one of the most profound compliance changes in corporate finance since Sarbanes-Oxley! The article included a great analogy: “it’s as if your teacher isn’t just demanding that you show your work, but also that you write an in-depth essay explaining the approach you chose, why you chose it, what assumptions you made, what tools you used, and what processes you followed to ensure nothing would go wrong.” And it’s five months away! Are you ready? If not, we offer customized revenue recognition workshops, so contact us today!

Amazon says new accounting rule will change when it recognizes sales of its devices (August 15, 2017) – MarketWatch (@MarketWatch)

ASC 606, which goes into effect for public companies in 2018, will have a significant impact on a wide range of customer services across retailers and restaurant chains, including credit vouchers, loyalty programs, and credit card rewards. Amazon, which is one of many companies facing significant impacts, announced that as a result of adopting ASC 606, sales of their branded electronic devices will need to be recognized upon sale to the retailer rather than to the end customer. Unredeemed gift cards will also be recognized earlier than before.

How It’s Relevant: Yes, another article about adopting 606! Just imagine the impact ASC 606 will have on big retailers or restaurants such as Amazon, Wal-Mart, Starbucks, and Target (I probably buy something from one of those on a daily basis!). I recently wrote about this article in another GAAP Flash and discussed the impacts on gift cards as a result of ASC 606. Don’t forget about our free, 1-hour eLearning module on ASC 606 if you need to get up to speed on the changes. Or check out our revenue recognition micro-learning videos here!

ACCA finds need for improved ethics in digital age (August 10, 2017) – Accounting Today (@AccountingToday)

The Association of Chartered Certified Accountants (ACCA) released a new survey (with over 10,000 respondents across 158 countries) raising questions about how accountants and businesses around the world consider the importance of ethics and how they are dealing with ethical challenges prompted by various technology trends such as cybersecurity, platform-based business models, big data analytics, cryptocurrencies, automation (A-I, machine learning), and procurement of technology. In the survey, about one out of five respondents admitted they had personally felt pressure to compromise their ethical principles over the past twelve months, with integrity being the most commonly compromised principle.

How It’s Relevant: The digital age is only going to continue to grow and permeate into the business world throughout a variety of areas. I actually just read an article about how young professionals in their 20’s are putting their retirement savings into Bitcoin! It’s important to remember that CPAs/external & internal auditors/firms (“accountants”) will play a pivotal role in guiding businesses on how to make technological decisions but at the same time, will have to uphold the public’s interests and communicate any breaches, attacks, etc. An accountant’s ethical responsibilities include integrity, objectivity, professional competency, due care, and confidentiality; all of these remain as important as ever in today’s (and tomorrow’s) digital age!

Doty to remain at PCAOB for search, transition (August 11, 2017) – Accounting Today (@AccountingToday)

PCAOB Chairman, James Doty, whose term technically expired in October 2015, has agreed to continue in place as the Trump administration looks for his successor, as well as nominees for several other positions on the board. The PCAOB’s member structure is currently thin: one board member’s term has expired, one board member’s term is set to expire in October, and one board member unexpectedly resigned in December 2016.

How It’s Relevant: While the PCAOB has some big shoes to fill, don’t think that inspections will be put on hold! It’s business as usual for the PCAOB, but who knows the direction it will go in once all appointments have been filled! In the meantime, download our free PCAOB eBook to learn about inspection findings. And staying on the topic of needing to fill some team member spots – we're hiring! If you are a CPA with any previous Big 4 experience looking to be a part of a spectacular team, contact us today!

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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