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Revenue Recognition

By: Brynn McNeil, Partner Revenue is critically important in the financial statements of companies. Thus, revenue recognition remains a priority for regulators and the accounting profession as a whole. Implementing the new revenue recognition standard, Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, will likely be the most significant and comprehensive change in many years for most companies. The core principle of FASB ASC 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for. Read More.

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Agency Discovers Revenue Standard to Significantly Impact Software Companies

Moody’s Investor Service says the Financial Accounting Standards Board’s (“FASB”) long-awaited revenue recognition standard will have a significant impact on the software industry. In a report issued on November 14, the credit rating agency found that the FASB’s standard will allow for faster recognition of revenue for numerous software companies. The result, according to Moody’s Vice President and Senior Accounting Analyst David Gonzales, is a drastic shift in revenue. Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers (Topic 606), introduces a streamlined method wherein most companies must disclose the top line in their financial statements. This method replaces several. Read More.

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Revenue Standard Could Have Major Impact on Software Industry

With the Financial Accounting Standards Board’s (“FASB”) new revenue recognition rules becoming effective in three months, the Accounting Standards Update (“ASU”) could have a major effect on the bottom lines of companies in the software industry. Under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), software companies will have to recognize more revenue when the sale occurs. However, companies in the software industry have long-term arrangements with customers, meaning revenue is usually recognized over the life of the contract. One software company already feeling the impact is Microsoft, which was an early adopter of the standard. Under the. Read More.

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FASB Agrees on Guidance for Troubled Debt Restructurings

The Financial Accounting Standards Board (“FASB”) plans to clarify its guidance for troubled debt restructurings under Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During its September 6 meeting, the FASB agreed that lenders should assess the impact of the restructuring when the individual troubled loan is known. In certain situations, banks are free to make estimates based on historic data, which the FASB refers to as a “portfolio-level” approach. FASB member Christine Botosan remarked that the decision allows banks to estimate troubled debt restructurings earlier, wherein the estimation. Read More.

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Bank Regulators Add Guidance for FASB Credit Loss Standard

Several bank regulators have updated their interpretive guidance regarding the Financial Accounting Standards Board’s (“FASB”) credit loss standard. The revised guidance from Federal Deposit Insurance Corporation, Federal Reserve, the National Credit Union Administration, and the Office of the Comptroller of the Currency will be added to the December 2016-published frequently asked questions document that explains why the FASB issued Accounting Standards Update No. No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance addresses how to handle subjective information when banks estimate their loss reserves when applying ASU No. 2016-13. In. Read More.

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FASB Issues Update on Certain Financial Instruments with Liabilities and Equity Characteristics

Following recommendations from the Private Company Council, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I simplifies accounting for select financial instruments with down round features, a rule in an equity-linked financial instrument or embedded feature that offers a downward adjustment. Read More.

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