PCAOB Issues Guidance for Revenue Recognition Standard
After reviewing implementation of Accounting Standards Update (“ASU”) No. 2014-09, Revenue From Contracts With Customers (Topic 606), the Public Company Accounting Oversight Board (“PCAOB”) is responding with a new Staff Audit Practice Alert (“APA”) to provide auditors with interpretive guidance. Released on October 5, APA No. 15, Matters Related to Auditing Revenue From Contracts With Customers, features 20 pages of staff guidance highlighting the PCAOB’s requirements and related considerations for audits. Such considerations include confirmation of management’s transition disclosures in financial statement notes and transition adjustments.
The PCAOB said that as implementation of the Financial Accounting Standards Board’s revenue standard begins, changes to companies’ systems, processes and controls may be necessary, or they will have to create new ones. If done poorly, the PCAOB warned that such changes my pose higher risks of material misstatement.
ASU No. 2014-09 will be effective next year for public entities.