GAAP Flash - ASC 842, ASC 606, SSARS No. 24, and the SEC - 3/2/18
GAAP Flash - ASC 842, ASC 606, SSARS No. 24, and the SEC - 3/2/18

GAAP Flash - ASC 842, ASC 606, SSARS No. 24, and the SEC - 3/2/18

This week’s GAAP Flash includes articles about the challenges companies face while preparing to implement the new leasing standard (ASC 842), the positive impact of the new revenue recognition standards (ASC 606) for Tesla, new review report requirements that will be released after busy season, and the SEC’s call for public companies to disclose more information on cybersecurity procedures and incidents.

Most companies are struggling with new lease accounting standard (February 26, 2018) Accounting Today (@AccountingToday)

A recent survey by Lease Accelerator, which is an accounting software company, reported that 75% of the companies surveyed found that the new lease accounting standard (ASC 842) is more complex than expected! ASC 842 requires the identification of all leases on the balance sheet and approximately 60% of the respondents in this survey noted that compiling this data is the biggest obstacle. Other implementation issues also include modifying business processes, balancing project management, identifying and deploying the right software, and performing the required accounting.

How It’s Relevant: Plenty of work needs to be done between now and the beginning of 2019 (when ASC 842 is effective for public companies) and an important first step to creating an implementation plan is understanding the changes inside and out! The survey also revealed that 75% of the companies surveyed believe the new leasing standard is just as complicated (if not more) than the revenue recognition standard! Two big accounting changes in a short period of time can feel overwhelming. Our U.S. GAAP Update course is a perfect way to make sure your staff is prepared for the most recent changes!

New accounting rules trim Tesla deficit and promise faster future revenues (February 27, 2018) MarketWatch (@MarketWatch)

Tesla Inc. is certainly thankful for the new revenue recognition standard (ASC 606)! The company reduced its accumulated deficit in the beginning of 2018 by $520 million (pre-tax) from adopting ASC 606 and can now recognize revenue from leased cars much more quickly. Tesla, along with Ford and GM, used the modified retrospective method in adopting ASC 606 and this article walks through the impact the adoption has had on all three companies in the automotive industry.

How It’s Relevant: The implementation of ASC 606 is affecting companies in different ways, especially depending on the industry. It has been interesting to see the various annual report disclosures and understand the related impacts from adopting ASC 606; however, many companies had not forecasted the new tax reform changes! Luckily for Tesla, there was no significant impact from the new tax reform. Are you still trying to hash out the new ASC 606 rules? GAAP Dynamics has created a step-by-step guide that walks through the new revenue recognition model. Download the guide here, and feel free to contact us with any questions you have!

Revised compilation and review report requirements to be included in SSARS No. 24 (February 1, 2018) Journal of Accountancy (@AICPA_JofA)

The AICPA Accounting and Review Services Committee (ARSC) will issue a new standard in May that will contain updated requirements to compilation and review reports. The new standard is called the Statement on Standards for Accounting and Review Services (SSARS) No. 24, Omnibus Statement on Standards for Accounting and Review Services – 2018.

How It’s Relevant: SSARS No. 24 is creating a new section relating to international reporting issues and is streamlining going concern considerations. Additionally, overall practice issues are addressed when it comes to using the work of other accountants in a review or a compilation. As busy accountants with deadlines, it can be easy to miss important updates that may apply to you or your clients. At GAAP Dynamics, we make every effort to stay on top of the latest accounting news! Follow us on twitter and subscribe to our blogs so you never miss out on important accounting updates!

SEC wants cybersecurity disclosures (February 26, 2018) Accounting Today (@AccountingToday)

The SEC unanimously approved guidance to encourage public companies to disclose information on cybersecurity incidents and the potential risks. The SEC Chairman, Jay Clayton, stated that the disclosures will result in complete information available to investors. He also urged companies to take a close look at their cybersecurity controls and procedures. These days, cybersecurity incidents are becoming more common, and informing investors about potential risks is crucial.

How It’s Relevant: In the wake of the Equifax breach, we know that no company is safe from cyber-attacks! It seems like common sense to make sure that there are policies and procedures in place to prevent or mitigate the risk of security breaches. But disclosing this information to investors, along with any material incidents that may have occurred, is good practice. Investors deserve to know how companies are handling cybersecurity, which is certainly a hot topic these days! 

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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Comments (1)

  1. Rohit Khurana:
    Oct 10, 2018 at 01:45 AM

    Hi, This is really a nice post, I read this complete post. This is really a very helpful post. Thank for posting such a useful article.


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