This week’s GAAP Flash includes articles about potential increases in health care fraud due to the adoption of ASC 606, a new ASU (2017-02) that aims to simplify hedge accounting (ASC 815), COSO releasing its updated ERM framework, and how the IRS is starting to track bitcoin transactions.

Revenue recognition standard could contribute to health care fraud (August 31, 2017) – Accounting Today (@AccountingToday)

ASC 606, which is effective in 2018, could help health care providers and regulators identify instances of Medicare and Medicaid fraud by subjecting their financial statements to new scrutiny, although in some ways the new rules could also spur additional forms of fraud. ASC 606 comes at a time when many organizations are still adjusting to Medicare’s new value-based reimbursement program and trying to understand the specified clinical and quality measures that could potentially result in increased fraud due to overall implementation complexities along with complexities in the health care environment.

How It’s Relevant: Did you think I would go a week without talking about revenue implementation? No way, ASC 606 is four months away! The health care industry is already complex and now it’s becoming even more complex with the adoption of ASC 606. The Justice Department and the Department of Health and Human Services have been increasing their efforts to crack down on health care fraud so companies and auditors will need to be very granular in understanding contract terms and revenue streams. I really hope you are ready for ASC 606 but if not, we offer customized revenue recognition workshops, so contact us today if you have any questions!

New FASB standard aims to simplify hedge accounting (August 28, 2017) – Journal of Accountancy (@AICPA_JofA)

The FASB issued ASU 2017-12, Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities, to better align accounting rules with a company’s risk management activities, to better reflect the economic results of hedging in the financial statements, and to simplify hedge accounting treatment. In creating the standard, the FASB sought to address concerns of both preparers who found hedge accounting rules burdensome and users who had difficulty understanding some of the presentations of hedge accounting information.

How It’s Relevant: Hedge accounting is not easy! Since 2005, the FASB has had a long-term objective to improve and simplify the reporting for financial instruments as it relates to classification/measurement, impairment, and hedging so this is a long time coming! Decreasing the administrative burden on preparers, improving presentation and disclosures, and updating the measurement strategies were a priority with the new standard, which we all appreciate. Refer to this FASB in Focus for additional details on the new standard. And don’t forget that we offer a U.S. GAAP Update course in which we cover all the latest changes to U.S. GAAP!

Updated COSO ERM framework ties in risk with strategy (September 6, 2017) – Journal of Accountancy (@AICPA_JofA)

COSO has released an updated risk framework, Enterprise Risk Management (ERM) – Integrating With Strategy and Performance, that highlights the importance of ERM’s role in strategic planning. The updated framework provides a view on current and evolving concepts and applications of ERM and is divided into five components that accommodate different viewpoints and operating structures to enhance strategies and decision making.

How It’s Relevant: ERM is imperative to a company’s success; it’s a culture that needs to successfully integrate with strategic decisions and manage a company’s risk. Companies face evolving demands and they need to know how to navigate any challenges when making strategic business decisions to meet those demands. This framework, which also coincides with COSO’s Internal Control Integrated Framework, will hopefully aid companies in strategic decisions such as setting performance targets, governance, and how to handle evolving technology. Take a look at COSO’s Executive Summary for more information on the updated ERM framework.

IRS signs contract to track bitcoin transactions (August 28, 2017) – Accounting Today (@AccountingToday)

The IRS has been pushing for ways to track bitcoin transactions as they believe bitcoin and other forms of digital currencies are being used for tax evasion. The IRS recently signed a contract with a company called Chainalysis to track and analyze bitcoin transactions to trace money movement within the digital world and to uncover the underlying purposes of those transactions.

How It’s Relevant: I continue to be fascinated by bitcoin and the digital currency world! Bitcoin is continuing to gain momentum but unfortunately, there is not much accounting guidance on digital currency. Luckily, the FASB is in the early stages of developing an accounting standard for digital currency and the IRS is close to issuing additional guidance on bitcoin taxes as discussed in this Wall Street Journal article. So please hold off on investing your retirement savings in bitcoin until we have more information!   

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