Wiley Revenue Recognition plus Website: Understanding and Implementing the New Standard

223 Pages·2017·6.72 MB·English

by  Flood

WEBFFIRS 01/12/2017 4:8:16 Pageii
WEBFFIRS 01/12/2017 4:8:16 Pagei
Revenue
Recognition
WEBFFIRS 01/12/2017 4:8:16 Pageii
WEBFFIRS 01/12/2017 4:8:16 Pageiii
Revenue
Recognition
Understanding and Implementing
the New Standard
Joanne M. Flood
WEBFFIRS 01/12/2017 4:8:16 Pageiv
Coverdesignandimage:Wiley
Copyright2017byJohnWiley&Sons,Inc.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformorbyany
means,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptaspermittedunderSection
107or108ofthe1976UnitedStatesCopyrightAct,withouteitherthepriorwrittenpermissionofthePublisher,or
authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222
RosewoodDrive,Danvers,MA01923,[phone],fax[phone],orontheWebatwww.copyright.com.
RequeststothePublisherforpermissionshouldbeaddressedtothePermissionsDepartment,JohnWiley&Sons,
Inc.,111RiverStreet,Hoboken,NJ07030,[phone],fax[phone],oronlineathttp://www.wiley
.com/go/permissions.
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsinpreparing
thisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyorcompletenessofthecontentsof
thisbookandspecificallydisclaimanyimpliedwarrantiesofmerchantabilityorfitnessforaparticularpurpose.No
warrantymaybecreatedorextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies
containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessionalwhereappropriate.
Neitherthepublishernorauthorshallbeliableforanylossofprofitoranyothercommercialdamages,includingbut
notlimitedtospecial,incidental,consequential,orotherdamages.
Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,pleasecontactourCustomer
Care Department within the United States at [phone], outside the United States at [phone] or
fax[phone].
Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Somematerialincludedwith
standardprintversionsofthisbookmaynotbeincludedine-booksorinprint-on-demand.Ifthisbookrefersto
mediasuchasaCDorDVDthatisnotincludedintheversionyoupurchased,youmaydownloadthismaterial
athttp://booksupport.wiley.com.FormoreinformationaboutWileyproducts,visitwww.wiley.com.
AcatalogrecordforthisbookisavailablefromtheLibraryofCongress.
ISBN978-1-118-77685-8(paperback)
ISBN978-1-119-35169-6(ebk)
ISBN978-1-119-35168-9(ebk)
ISBN978-1-119-35164-1(ebk)
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
WEBFTOC 01/12/2017 4:12:2 Pagev
CONTENTS
ExecutiveSummary 1
1 Step1—IdentifytheContractwiththeCustomer 27
2 Step2—IdentifythePerformanceObligations 45
3 Step3—DeterminetheTransactionPrice 59
4 Step4—AllocatetheTransactionPrice 85
5 Step5—RecognizeRevenueWhen(OrAs)theEntity
SatisfiesaPerformanceObligation 101
6 OtherIssues 123
7 ContractCosts 159
8 PresentationandDisclosure 169
9 ImplementationIssues 191
AbouttheCompanionWebsite 203
Index 205
v
WEBFTOC 01/12/2017 4:12:2 Pagevi
WEBFSUM 01/12/2017 4:14:30 Page1
EXECUTIVE SUMMARY
WhatIsRevenue? 2 FullRetrospectiveApproach 11
RevenueversusGains 2 ModifiedRetrospectiveApproach 11
U.S.GAAP 2 ObjectiveoftheStandard 12
ExhibitES.1Distinguishingbetween CorePrincipleandtheFiveStepsof
revenueandgainsinU.S.GAAP 2
theRevenueRecognitionModel 12
IFRS 2 ExhibitES.3Thefivesteps 12
TheNewRevenueStandard 3
ExampleES.3:ApplicationoftheCore
DevelopmentofRevenueGuidance 3 PrincipleThroughtheFiveSteps 13
U.S.GAAP 3 ExhibitES.4Overviewandapplicationof
IFRS 4 thefivestepsintherevenuerecognition
TheRevenueRecognitionProject 4 model 13
TheNewStandards 4 DisclosuresRequiredBytheStandard 14
ProjectGoals 5 FormingandDocumentingProfessional
CustomerLoyaltyPrograms 5 Judgment 14
ExhibitES.2KeydifferencesbetweenASU
DisclosuresRequiredforaNew
2014-09andIFRS15 6
Standard 15
Scope 8
OtherChangesIncludedinthe
ScopeExceptions 8
Standard 15
ExampleES.1:NonmonetaryExchangesto
SECResponse 16
FacilitateSalestoCustomersorPotential
Industry-SpecificGuidanceSuperseded 16
Customers 9
ContractsPartiallyinScope 9 AICPAIndustryCommittees 17
ExampleES.2:ContractPartiallyOutof ChangestoIndustry-SpecificGuidance 17
Scope 10 ExhibitES.5Statusofindustry-specific
SaleofTransferofNonfinancialAssets 10 guidanceinASU2014-09foraffected
EffectiveDates 10 industries 18
ChangestoEffectiveDates 10 TransitionResourceGroup 19
U.S.GAAP 10 Appendix:StatusofIssuesBroughtto
IFRS 11 theBoards 21
OtherChangestotheStandard 11
ImplementationOptions 11
1
WEBFSUM 01/12/2017 4:14:30 Page2
2 WileyRevenueRecognition
WHAT IS REVENUE?
U.S.GAAP
Revenue:Influxorotherenhancementofassetsofanentityorsettlementsofliabilities
(oracombinationofboth)fromdeliveringorproducinggoods,renderingservices,orother
activitiesthatconstitutetheentity’songoingmajororcentraloperations.(ASC606-10-20)
IFRS
Revenue: Income arising in the course of an entity’s ordinary activities. (IFRS 15,
Appendix A)
Income: Increases in economic benefits during the accounting period in the form of
inflows or enhancements of assets or decreases in liabilities that result in an increase in
equity other than those relating to contributions from equity participants. (IASB
Framework)
RevenueversusGains
U.S.GAAP. TheU.S.FinancialAccountingStandardsBoard(FASB)distinguishesrevenue
fromgains.GainsaredefinedinStatementofFinancialAccountingConcept6(CON6),Elements
of Financial Statements, as
Increasesinequity(netassets)fromperipheralorincidentaltransactionsofanentityandfromall
othertransactionsandothereventsandcircumstancesaffectingtheentityexceptthosethatresult
from revenuesor investments byowners.
Revenue is commonly distinguished from gains in U.S. GAAP for the three reasons listed
below.
ExhibitES.1 Distinguishing between revenueandgains in U.S. GAAP
Revenue Gains
Resultsfromanentity’s Resultfromincidentalorperipheralactivitiesoftheentity.
centraloperations.
Isusuallyearned. Resultfromnonreciprocaltransactions(suchaswinningalawsuitor
receivingagift)orothereconomiceventsforwhichthereisnoearnings
process.
Isreportedgross. Arereportednet.
IFRS
TheIASB’sdefinitionofincomeincludesrevenueandgains.Gainsaredefinedasincreasesin
economicbenefitsandotheritemsofrevenue.Theymayormaynotoccurintheordinarycourse
of business.