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.
Topics: Accounting Standards Update, FASB, Financial Accounting Standards Board "FASB", Revenue from Contracts with Customers (Topic 606), Revenue Recognition, Software, Software Industry, vendor specific objective evidence "VSOE"
FASB Drops Materiality Project
After two years of controversy, the Financial Accounting Standards Board (“FASB”) is scrapping plans to continue work on its proposal to amend the definition of materiality. The project, which commenced in September 2015, set out to align U.S. GAAP’s meaning of materiality with the legal interpretation regulators and courts use so companies can carefully decide their disclosures in financial statement footnotes. Work on the materiality amendments ended Wednesday, November 8. Board members did not expect to receive criticism for Proposed Accounting Standards Update No. 2015-310, Notes to Financial Statements (Topic 235): Assessing Whether Disclosures Are Material. Wall Street investors led the. Read More.
Contractor’s Obligations to Monitor their Subcontractors
By: John Ford , Senior Consultant and Eric Poppe , Senior Manager Federal Acquisition Regulation (“FAR”) 42.202(e)(2) states that “[t]he prime contractor is responsible for managing its subcontractors.” However, the FAR does not provide further guidance as to what this means. At least one Defense Contract Audit Agency (“DCAA”) office and Defense Contract Management Agency (“DCMA”) contracting officer have contended that this means that prime contractors are to perform all the functions of a DCMA Contract Administration Office in regard to subcontractors. Based on this theory, the Administrative Contracting Officer (“ACO”) issued a claim for over $100,000,000 against Lockheed Martin Integrated Systems, Inc. (“LMIS”). Read More.
GASB Issues Exposure Draft on Majority Equity Interests
New accounting and financial reporting guidance could be on the way for state and local governments with a majority equity interest in an organization that is legally separate following acquisition. In its recently issued Exposure Draft, Accounting and Financial Reporting for Majority Equity Interests, the Governmental Accounting Standards Board (“GASB”) proposes that a government’s majority equity interest in a legally separate organization could be disclosed as an investment if the equity interest falls under the board’s definition of an investment. The equity method would be applied to majority equity interests that fit the definition of an investment, with the exception of certain situations. If a majority equity interest in a. Read More.
Audit Committees Continue to Improve Transparency of External Oversight
For the fourth consecutive year, audit committees are improving transparency regarding their external auditor oversight. The news was revealed by the Center for Audit Quality (“CAQ”) and Audit Analytics’ new report, Audit Committee Transparency Barometer (“Barometer”), which stated that audit committees are voluntarily increasing the information disclosed to investors and stakeholders. This year’s Barometer report features year-over-year comparisons of significant audit committee disclosure areas for various-sized companies, including: 37 percent of S&P 500 companies’ proxy statements have increased discussion of the audit committee’s considerations in endorsing the selection of the audit firm (13 percent rise from 2014); 24 percent of mid-cap companies have increased. Read More.
Proposed Grants and Contributions Guidance Receives Support
With the comment period ending last week for Proposed Accounting Standards Update (ASU) No. 2017-270, Not-for-Profit Entities (Topic 958) Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, nonprofit and professional groups and audit firms have expressed support for the Financial Accounting Standards Board’s (“FASB”) attempts to simplify how organizations disclose revenue from grants and contributions. Mostly impacting nonprofits like charities and foundations, the proposal revises the guidance on determining whether gifts to nonprofit groups must be presented as contributions subject to ASC 958-605, Not-for-Profit Entities—Revenue Recognition, or as reciprocal transactions (i.e., exchanges) subject to ASC 605/606. The. Read More.
Topics: FASB, Financial Accounting Standards Board "FASB", Financial Reporting Executive Committee "FinREC", Grants & Contributions, Nonprofits, Not-for-Profit Entities (Topic 958), Proposed Accounting Standards Update