This week’s GAAP Flash includes articles about a specific rule on not-for-profits adopting ASC 606, the future of the bitcoin world, the impact of blockchain and data analytics, and increasing audit committee transparency in proxy disclosures.

Nonprofits need to get ready for revenue recognition standard (October 27, 2017) – Accounting Today (@AccountingToday)

Public companies are required to adopt ASC 606 as of January 1, 2018 while private companies and not-for-profits are required to adopt as of January 1, 2019. However, in some cases, the 2018 public company adoption deadline can also apply to not-for-profits. As stated in FASB Staff Position 126-1, if a not-for-profit issues conduit debt (i.e. municipal debt), and if that debt is owned/held by the public, then the not-for-profit would be considered a public entity and would have to follow public company guidelines.

How It’s Relevant: Yikes! Hopefully all not-for-profits in this specific situation are aware of the requirement to adopt ASC 606 in 2018 as the Staff Position was issued in 2006. Regardless, even if a not-for-profit does not meet this rule, 2019 is not far away! Now is the time for not-for-profits to start preparing for the new guidance and to consider revenue streams (think gift shops or restaurants in a museum or state and local grant contract terms). We are here to help! Contact us for all of your questions and we can even customize a revenue recognition workshop to meet all of your needs!

Bitcoin exchange traded funds are the next step after futures (October 31, 2017) – Bloomberg Markets (@markets)

Investors that are excited over the returns from bitcoin, the largest cryptocurrency, but are barred from buying it will soon have their chance in the futures market and, eventually, exchange traded funds (ETFs). CME Group announced its plans to introduce bitcoin futures by the end of 2018, which follows Cboe Global Markets, while Ledger X currently offers bitcoin swaps and options.

How It’s Relevant: While the futures exchanges still need approval, bitcoin futures should make it easier to create ETFs, which will also eventually need SEC approval. However, bitcoin is not going away anytime soon: 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. Wall Street’s interest is growing, as noted in this recent article. It looks like here at GAAP Dynamics, we need to start thinking about a training on bitcoin accounting!

PCAOB's Franzel leans toward issuing blockchain and data analytics guidance (November 1, 2017) – Accounting Today (@AccountingToday)

Jeanette Franzel, PCAOB board member, recently spoke at the National Association of State Boards of Accountancy annual meeting and discussed the need for auditing firms and regulators to get a better grasp on blockchain and data analytics. The PCAOB has started to take notice of the use of data analytics, artificial intelligence, and blockchain within audits. The potential changes in how companies will automate processes and report transactions, along with how external auditors will analyze data, are significant and new guidance on these issues is needed.

How It’s Relevant: The way a company records a transaction and the way an auditor will audit that transaction through data analytics or artificial intelligence is changing as we speak! Blockchain was originally developed for bitcoin to securely and verifiably record transactions, but it has also proved to be useful in other company applications. Auditors need to consider how these changes will impact internal controls and the way documentation is obtained and tested. New guidance and new standards are needed to help all sides, but will the regulators be able to keep up with these changing times? We shall see!

Audit Committees tell investors more about their work (November 1, 2017) – Wall Street Journal (@WSJ)

In its annual Audit Committee Transparency Barometer report, the CAQ recently reported that 37% of S&P 500 companies furnished investors with a robust discussion on how they selected an audit firm (based on 2017 proxy disclosures), which is up from 31% a year earlier. The report examines various disclosures made, including: how long a firm has been the company’s auditor; the Audit Committee is responsible for appointing the auditor and fee negotiations; the criteria used to evaluate the external auditor on an annual basis; and the involvement in selecting the audit engagement partner.

How It’s Relevant: As noted in the CAQ report, disclosures have increased overall compared to the prior year. Transparency with investors has been a recent hot topic, especially with the new auditor report requirements, so I think it’s equally important for Audit Committees to have transparency with investors. Investors’ demands are increasing so improving transparency about decisions that are made from an Audit Committee perspective can bring an appreciation to the Audit Committee’s responsibilities. Hopefully this trend continues!