This week’s GAAP Flash includes articles about how various industries will be impacted by the revenue recognition standards, the crackdown by the E.U. on countries with low-tax rates, the new business contract between the IRS and Equifax to verify taxpayer identification, and an update to a PCAOB proposal.
How revenue recognition changes are affecting preparers like GE, Microsoft (September 28, 2017) – Journal of Accountancy (@AICPA_JofA)
The new revenue recognition standards will be effective for public companies at the beginning of 2018. Some companies will see a limited impact, while others have been disclosing the upcoming change for years. GE says they expect significant changes of revenue timing and classification. Retail industries need to change their accounting for gift cards, and software licensing companies will see a significant change in revenue timing as they implement the new standard. The article continues to outline common changes in industries such as telecommunications, oil and gas, and aerospace.
How It’s Relevant: It is officially crunch time! The revenue recognition standards affect most companies in some fashion. Many companies procrastinated planning for the change, especially because the concepts are not easy to grasp. Since the day the standard was released, GAAP Dynamics has made it a priority to understand the new rules inside and out. Our very popular 1-hour eLearning is free and helps the new standard feel less daunting!
E.U., Citing Amazon and Apple, Tells Nations to Collect Tax (October 4, 2017) – New York Times (@nytimes)
The E.U. is making a push against tax avoidance, specifying two giant American technology companies. They have ordered Luxembourg to collect unpaid taxes from Amazon, and commanded Ireland to reclaim billions of taxes from Apple. In the past, the E.U. has successfully sued countries that fail to comply with their regulations. There will certainly be pushback, because the countries will not want to give up their appeal to multi-national companies, and companies will want to continue shifting their profits to low-tax countries.
How It’s Relevant: For years, technology companies have taken advantage of doing business in nations that offer lower tax rates. Now it looks like the E.U. is cracking down on specific countries that are known to be a haven for multi-national businesses. The E.U. has targeted Apple, requesting that Ireland collect over $15 billion in back taxes! It will be interesting to see how American companies adjust their tax planning strategies if a lower corporate tax rate is passed here in the states.
Lawmakers question IRS’s $7.25M no-bid contract with Equifax (October 4, 2017) – Accounting Today (@AccountingToday)
In the wake of the Equifax data breach, the IRS has signed a no-bid $7.25 million contract with the company to verify taxpayer identities. Leaders of the Senate Finance Committee are questioning this move, and requested copies of contracts and details of the services Equifax will perform. This is in an attempt to understand the rationale of the IRS for trusting Equifax to help with their own data protection goals.
How It’s Relevant: It is strange that the IRS would contract with a company that appears to have been negligent with personal information, especially so quickly after a scandal! The IRS has suffered from data breaches in the past, and has been working to improve their systems and security. With almost everything being computerized today, it seems impossible to shelter your personal information. The IRS has been strongly encouraging tax returns to be filed electronically, and this move may result in more taxpayers filing their returns the old-fashioned way!
PCAOB revises proposal on supervision of other auditors (September 26, 2017) - Journal of Accountancy (@AICPA_JofA)
The PCAOB is revising its proposal that describes what a lead auditor would be responsible for when planning, managing, and evaluating the work of auditors from other firms. The proposal would create a uniform approach to the use of other auditors and increase the lead auditor’s involvement. The PCAOB is asking for public comments on the matter throughout the next month.
How It’s Relevant: The proposal provides additional clarification and guidance, which is always helpful. The more consistent and streamlined an audit process is, the smaller the room for error, and audit quality should increase. Auditors should consistently be working to strengthen the quality of all audits performed and determining where audit training could use improvement. Check out our free eBook on PCAOB inspection reports! It is a great resource for anyone working in the audit field.
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