Diversity in practice led the FASB to revisit the GAAP guidance for the Statement of Cash Flows that has been around since 1987 with the issuance FASB No. 95. Many people thought aspects of these rules were confusing (and contradictory, at times), or even missing entirely. In fact, restatements of public company financial statements often relate to issues with the Statement of Cash Flows (as noted in an earlier post).
Originally planned as a comprehensive project, the FASB altered course to focus efforts on just the most confusing areas, resulting in new guidance covering nine specific issues. The good news is that most of these issues rarely apply to nonpublic tech companies in the Silicon Valley. Eight issues are covered in ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments” issued in August 2016. Several of the issues that might be encountered include handling proceeds from insurance claims, distributions from equity method investees, and contingent consideration payments made after a business combination. Mid-sized companies outside of specific industries would rarely run into the remaining issues. (more…)
My first post about the FASB GAAP Simplification Initiative was in April 2015, and I have posted since then about specific GAAP changes under this umbrella that seemed to bestow the most widespread consequences for companies in Silicon Valley. Now seems like a good time to look back over the past year and a half for other GAAP simplification subjects you might not know about, but are not exactly esoteric topics. (more…)
Historically originating through the lens of the independent auditor, whose auditing standards require the auditor to consider “going concern” matters and potentially include cautionary language in the auditor’s report, all companies that issue GAAP-based financial statements are now required to perform their own evaluation and provide explanatory footnote disclosures in defined circumstances. (more…)
The same FASB that issued the new Revenue Recognition standard in late May 1014 (Accounting Standards Update No. 2014-09) at 700 pages long, or only 150 pages if you just count the actual revenue recognition guidance and don’t include the amendments required to other guidance, or the background information and basis for conclusions?
In a June 18, 2014 post, I wrote about some current efforts (and, more importantly, results) of the FASB related to simplifying several of the more troublesome areas of GAAP for non-public companies.
As an important reminder, the FASB private company GAAP exceptions can be elected as accounting policies by any non-public company (as defined by FASB), with the Company’s financial statements still being considered in conformity with GAAP. In other words, no GAAP exceptions would be reported by independent accountants in audit, review or compilation reports related to adoption of any of these alternatives, assuming the principles are properly applied.
Anyone responsible for providing GAAP-based financial information to external parties for a non-SEC listed company knows that some accounting and presentation requirements can be onerous to comply with and often have limited usefulness to the user of that financial information or, at the very least, the effort (cost) of providing that information does not seem to outweigh the benefits of having the information.
If “adoption” means embracing the full scope of IFRS (International Financial Reporting Standards) and relinquishing U.S. GAAP (Generally Accepted Accounting Standards), then the answer is probably “YES”, at least for the foreseeable future.
When you go to buy a car, yeah, you’re buying a massive computer system these days, but when it all boils down, you went to purchase a car, that’s why you went to the car lot not to Fry’s. The accounting rules for revenue recognition for sales involving multiple element arrangements, like buying a car with a computer, have recently become a whole lot easier. Many public companies like Apple early adopted these new accounting rules because they allow the company to accelerate the period of recognizing revenues. In Apple’s case…
When I was in college, I had a professor who always referred to the “real world of accounting.” After I got out of college and went to work for one of the large firms, I understood what that meant. One of these “real world” issues is whether we need two sets of accounting rules – one for publicly traded companies and one for privately held companies…