Business

The New World of Revenue Recognition: A Deep Dive into the 5 Steps to Recognition

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This issuance of the new standard for revenue recognition finally happened in May 2014, and will replace the current guidance in US GAAP and IFRS for revenue recognition. The new revenue rules which represent a paradigm shift from a rules-based to a principles-based guidance can impact several facets of a business. Companies will need to adjust policies and design new processes to ensure compliance.
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  • 1. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals The New World of Revenue Recognition: A Deep Dive into the 5 Steps to Recognition
  • 2. Learning Objectives After attending this event you will be able to: • Identify the relevant changes in the new revenue recognition guidance for your company • Assess the technical aspects of the 5 Steps of revenue recognition in the new standard • Discover the implications of “rules-based” and “principles-based” revenue recognition standards
  • 3. Welcome to Proformative Proformative is the leading educational resource for corporate finance professionals. Announcing the new Proformative Academy: • On demand video courses taught by peers and SMEs • Over 125 finance and accounting courses and growing rapidly • CPE for CPAs, CMAs, CTPs, and CIAs Check it out at www.ProformativeAcademy.com
  • 4. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals The New World of Revenue Recognition: A Deep Dive into the 5 Steps to Recognition Jeff Tchir, CPA, Director of Revenue Accounting, Silver Spring Networks
  • 5. What You Will Hear From Me Today • It’s been a long time coming • There is a methodology to the 5 Steps • Management will have more judgments to make • Impact on business models will vary and impact will vary within business models – Some things will stay the same – Some things will be a little different – Some things will be a lot different • Your business model should drive design and execution of process, procedure and policy change
  • 6. The Joint FASB/IASB Project
  • 7. Background and Status January 2002 – FASB discusses potential major project on revenue recognition June 2002 – IASB adds revenue recognition project to its agenda September 2002 – formal agreement to work jointly on the project 2002 to 2008 - lots of meetings and discussion around the basic framework and model December 2008 – discussion paper issued Where it came from…
  • 8. Background and Status June 2010 Exposure Draft November 2011 re- Exposure Draft January 2012 revised Exposure Draft 2012 to 2014 – redeliberations May 2014 FINAL STANDARD Where it’s at…
  • 9. The Core Principle
  • 10. Core Principle Principles Based Approach “…an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Steps to achieve the core principle will replace current US GAAP and current IFRS with respect to revenue recognition. Do not confuse this with the separate initiative that involves allowing US filers with the SEC to file financial statements prepared in accordance with IFRS.
  • 11. Steps to Achieve the Core Principle Step 1 • Identify the Contract(s) Step 2 • Identify the Performance Obligations Step 3 • Determine the Transaction Price Step 4 • Allocate the Transaction Price Step 5 the Obligation • Recognize Revenue upon Satisfaction of
  • 12. The New World of Revenue Recognition: A Deep Dive into the 5 Steps to Recognition Thank you for your interest in this presentation. View the on-demand webinar or download the full presentation at: www.Proformative.com
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