The new revenue recognition model, although simplistic in its presentation, can be difficult in actual implementation. Organizations must have a strong understanding of elements within each of the five steps that must be evaluated and considered prior to recognizing revenue. Entities applying the new Accounting Standards Codification (ASC) Topic 606: Revenue from Contracts with Customers must follow five steps to revenue recognition.
This course is designed for individuals who have an understanding of the five step process and who wish to “test their knowledge” through scenario analysis. This segment will evaluate steps three, four and five of the model and apply case scenario analysis to components within each of these steps including: This course is part one in a two part series. We will review concepts important to step three “Determine Transaction Price” including evaluation of components of variable consideration factors for determining variability. We will also examine concepts important to step four “Allocate Transaction Price to Performance Obligations” and evaluate concepts of stand-alone selling price and methods to allocate price such as adjusted market assessment, expected cost-plus margin, residual method. Lastly we will examine concepts related to step five “Recognize Revenue” including concepts of how to recognize revenue at a point in time or over-time.
Each learning objective listed utilizes multiple examples from various industries to help interpret and practice the concept. Participants will be able to review case facts and apply their knowledge of important aspects for each step to the specific scenario.
Publication Date: May 2019
Topics Covered
- Evaluating and determining transaction price (TP)
- Breaking down five considerations when determining TP
- Components of variable consideration
- Constraining estimates of VC
- Financing components of a contract
- Noncash consideration
- Consideration payable to customer
- Methods to allocate TP to performance obligations (PO)
- Stand-alone selling price
- Methods to allocate price such as adjusted market assessment, expected cost-plus margin, residual method
- Methods to recognize revenue
- Recognizing revenue over-time vs. at a point in time
Learning Objectives
- Recognize and apply methods for executing Step Three "Determine Transaction Price" and determine how to utilize concepts dealing
- Recognize and apply methods for executing Step Four "Allocate Transaction Price to Performance Obligations" and determine how to utilize concepts
- Recognize and apply methods for executing Step Five "Recognize Revenue" and determine how to utilize considerations
- Identify the five considerations when determining TP including: Variable consideration (VC); Constraining estimates of VC; Financing components of a contract; Noncash consideration; Consideration payable to customer
- Describe methods to allocation TP to PO
- Identify and apply exercises relating to Allocation of TP to PO
- Describe methods to recognize revenue and apply exercises
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Auditing (2 hours)
Program Prerequisites
None
Advance Preparation
None
Instructor
Lynn Fountain
Lynn Fountain has over 38 years of experience spanning public accounting, corporate accounting and consulting. 20 years of her experience has been working in the areas of internal and external auditing and risk management. She is a subject matter expert in multiple fields including internal audit, ethics, fraud evaluations, Sarbanes-Oxley, enterprise risk management, governance, financial management and compliance. Lynn has held two Chief Audit Executive (CAE) positions for international companies. In one of her roles as CAE, she assisted in the investigation of a multi-million-dollar fraud scheme perpetrated by a vendor that spanned 7 years and implicated 20 employees. The fraud was formally investigation by the FBI and resulted in 5 indictments estimating a $13M fraud loss.
Ms. Fountain is currently engaged in her own consulting and training practice. She is a highly sought-after trainer and international speaker. In addition, Ms. Fountain has assisted numerous companies with enterprise risk management frameworks, internal audit processes and financial accounting. She also serves as a discussion leader for the AICPA for numerous classes finance, accounting and risk management topics.
Ms. Fountain is the author of three separate technical books. Her first book released in 2015 by the Institute of Internal Auditors Foundation is entitled “Raise the Red Flag – The Internal Auditors Guide to Fraud Evaluations”. Her second book “Leading the Internal Audit Function” was released in October 2015 by Taylor & Francis Publications. This book serves as the initial launch for a series of leading practice internal audit and information technology publications. Her third book “Ethics and the Internal Auditor’s Dilemma” was released in December 2016.
Ms. Fountain obtained her BSBA from Pittsburg State University and her MBA from Washburn University in Kansas. She has her CPA, CGMA, CRMA credentials.