In the last couple of years, I have witnessed several of my private company clients reorganize their operations, through either a merger, an acquisition or a significant management member buyout. While such situations provide a great stage for all to display their accounting chops, they also present us an opportunity to consult with our clients and help them avoid an accounting faux pas or burdensome and unnecessary disclosures caused by an inadvertent accounting election. So, in no specific order, I thought I would summarize some of the unique accounting issues I’ve encountered in such situations and how to navigate them: (more…)
CPAs Talk Tech Biz
By Wei Wei, Tax Senior
As you have been made aware from our series of webinars, e-mail updates and blog posts, President Trump signed the Tax Cuts and Jobs Act just in time for the new year and the Act includes new rules for the taxation of “qualified equity grants”. Internal Revenue Code Section 83(i) allows “eligible employees” to elect to defer taxation on the exercise of certain stock options or the settlement of restricted stock units for up to 5 years. Employees must make the election no later than 30 days after the employee’s rights in “qualified stock” are transferrable or vested. The election only defers income tax, the stock-based compensation received by the employee is still subject to employee and employer payroll taxes when vested. (more…)
Historically a taxpayer selling tangible property was not required to collect a state’s sales tax unless the taxpayer had “nexus” within the state. Nexus is generally defined as a “connection to the state”. My prior blog discussed the changing concept of nexus: Do You Meet the Newest Invisible Tax Filing Requirement?. The landmark 1992 Supreme Court case of Quill v. North Dakota established a physical presence standard. For a state to impose an obligation for a taxpayer to collect sales tax, the taxpayer must have a physical presence within the state. In recent years to generate new sources of tax revenue states have sought to expand the concept of nexus far beyond the physical presence test. These new standards look at economic nexus. (more…)
Life can become a blur when you are devoting so much time to a start-up business or to a new product release. As accountants, our job is to keep recordkeeping as up to date as possible while engineering and marketing move quickly to make sure the product hits the sales window at just the right time. Recordkeeping is especially critical at yearend. Now is a good time to take a minute to make sure all your company’s compliance requirements are being handled. To assist you in this assessment, here is a list of items that should be addressed in the next couple of months to make sure your company’s recordkeeping is maintained at the level expected by investors or other third parties. (more…)
Revenue Recognition Update – Step 5: Recognizing Revenue When (Or As) the Entity Satisfies a Performance Obligation
By Josh Cross, Senior Audit Manager
After all the research and analysis put in working through the prior four steps, you are now able to begin the process for recognizing revenue for the transaction price (Step 3) which has been allocated to each performance obligation (Step 4).
Each performance obligation identified in Step 2 can be satisfied by either the transfer of a promised good or by performing a service to the customer. This distinction will be the main driver for the next decision that needs to be made, and that is, whether the revenue needs to be recorded over time or at a point in time. For a good majority of the identified performance obligations, a good or service will be transferred/consumed over a period of time and therefore revenue would be recognized over that same time period. ASC 606 has helped in this analysis by providing guidance, so to recognize revenue over time, one of the following criteria needs to be met: (more…)
If you have been following Steps 1 (Identify the Contract with the Customer) through 3 (Determining a Transaction Price), of the revenue recognition update as eagerly as I have, then I am sure that you keenly await the discussion on Step 4 about the allocation of the transaction price to the performance obligations in a contract. The wait is over as we explore Step 4 in this blog post. A couple key concepts that we need to understand in this process: the allocation objective and standalone selling price. (more…)
By Josh Cross, Senior Audit Manager
Now that all of the performance obligations (Step 2) of the contract have been separately identified, it’s time to determine a transaction price. Seems easy, right?
ASC 606 defines the transaction price as “the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).” On the surface this sounds like an easy step for your entity to identify the price you are selling a product for, but in practice we know that not all transaction prices are fixed at the onset of the contract. When calculating the transaction price, an entity needs to consider all of the following: (more…)
Stories of cyber-attacks, malware, ransomware and all possible variations of data breaches have been grabbing headlines in recent months. Personally, I’ve been on the receiving end of phishing emails from several of my business contacts, unbeknownst to them, asking me to click on spurious links “recommended” by them. My colleagues Kay Filler and Nick Sabbatini wrote on the topics of ID theft and data breach risks not too long ago and offered some handy tips on the subject: ID Theft – Insider View & Technology and Connectivity: Understand and Mitigate Data Breach Risks. (more…)
To continue the discussion of the ASC 606, Step 2 of the revenue recognition process requires examining what the seller has promised to do for the customer, and if there are multiple promises, whether these promises should be accounted for separately or combined. This examination determines the performance obligations which are the basis for the revenue recognition. (more…)