EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Those costs incurred for data conversion and training are expensed as incurred. ASC seeks comments on Business Combinations under Common Control. If no other U.S. GAAP applies, manufacturers should apply ASC 340-40, which requires the following: Post navigation. 2014-09, Revenue from Contracts with Customers (Topic 606), approaches, the time to begin planning for implementation is now. We recommend you to carefully evaluate … An insurance or reinsurance contract that transfers only significant underwriting risk. Get Wiley GAAP 2015: Interpretation and Application of Generally Accepted Accounting Principles 2015 now with O’Reilly online learning. ASC 340‐10 provides guidance on certain deferred costs and prepaid expenses. Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation — Identifying a Controlling Financial Interest Contingencies, Loss Recoveries, and Guarantees Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Debt Distinguishing Liabilities From Equity Earnings … *** This category includes SEC staff comments on fair value measurements under Accounting Standards Codification ( ASC) 820, Fair Value Measurement, as well as fair value estimates, such as those related to revenue recognition, stock compensation an d goodwill impairment analyses. 2. for new debt or as a discount or immediate expense under the debt modification guidance in ASC 470-50, 3. with the increase in fair value considered a Day 1 outflow in the 10% cash Arrange for a friend or family member to accompany you to Eye 35 ASC. While the easy solution is for companies to expense advertising as it is incurred, both the IRS and FASB say in some circumstances it should be capitalized. The specific guidance for many other deferred costs is included in various other areas of the Codification. As FRSs are based on International Financial Reporting Standards (IFRS Standards) issued by the International Accounting Standards Board and the copyright to IFRS Standards is owned by the IFRS Foundation, permission to use FRSs for any other purpose is required from the ASC and the IFRS Foundation with regard to FRSs and IFRS Standards, respectively. • Diversity in practice will continue Nonpublic entities are required to apply the guidance in annual periods beginning after December 15, 2018 and in interim periods beginning after December 15, 2019. ASC Codification Topic 310: Receivables : ASC Codification Topic 320: Investments-Debt and Equity Securities: ASC Codification Topic 323: Investments-Equity Method and Joint Ventures: ASC Codification Topic 325: Investments-Other : ASC Codification Topic 330: Inventory : ASC Codification Topic 340: Other Assets and Deferred Costs ASC 340‐10 provides guidance on certain deferred costs and prepaid expenses. In 2019, the latest FASB standard on lease accounting, ASC 842 (ASU 2018-11), went into effect for most public companies. The Overall Subtopic addresses the accounting and reporting for certain deferred costs and prepaid expenses. In the time since FASB passed the new accounting standard ASC 842 in 2016, the organization has issued periodic updates to the codification for generally accepted accounting principles (GAAP). 1 (and codified in ASC 606) by the FASB and as IFRS 15. ASC 340-40 allows companies to capitalize some contract fulfillment costs. We believe the entity needs to perform a thorough analysis of the facts and circumstances to determine whether ASC 340-40 applies. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Section 15. ASC 842 Leases Impact on lessee’s key performance indicators for operating leases KPIs Effect of ASC 842 (operating leases) Increase (because most leases previously accounted for as operating leases will now be on balance sheet) Gearing (Debt to Equity Ratio) Liabilities/Equity Remains unchanged (because lease expense New leases standard Any costs for business process Financial Accounting Standards oard (“FAS”) ASC 340-40-25-1 states that an entity should recognize an asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs. In the time since FASB passed the new accounting standard ASC 842 in 2016, the organization has issued periodic updates to the codification for generally accepted accounting principles (GAAP). 2019-06 May 2019 Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958) • Gate 2 –Does the mechanism meet the 3 criteria of ASC 980-605-25-4 −Established by an order w/automatic rate adjustment • This is not your traditional ASC 980-340 probability model −Amount of additional revenues are objectively determinable −Additional revenues must … Within ASC 606 is a sub-chapter titled ASC 340-40-25 that prescribes how the costs related to obtaining a contract should be capitalized. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Provide a foundational understanding of identifying costs to be capitalized under ASC 340-40. 340-10 Overall. Per ASC 340-20-15-4: Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. ASC 340-40-50-2 to 50-3; ASU 2014-09: “Revenue from Contracts with Customers.” BC336, BC338-BC340. “Direct-response advertising activities exclude advertising that, though related to the direct-response advertising, is directed to an audience that could not be shown to have responded ... Take O’Reilly online learning with you and learn anywhere, anytime on your phone and tablet. ASC 842 replaced ASC 840 for public companies starting on January 1, 2019. What to Expect. ASC 340 comprises four Subtopics (Overall, Capitalized Advertising Costs, Insurance Contracts that Do Not Transfer Insurance Risk, and Other Assets and Deferred Costs — Contracts With Customers). The specific costs in each of these categories are listed in the following table and are discussed in detail throughout the article. EY, Financial Reporting Developments: “Revenue from contracts with customers.” October 2018. Costs incurred for integration with on-premise software, coding and configuration or customization are capitalized as intangible assets. Costs incurred in fulfilling a contract with a customer that are not in the scope of another Topic. The Bottom Line • In May 2014, the FASB and the International Accounting Standards Board (IASB ®) issued their final standard on revenue from contracts with customers. ASC 340, Other Assets and Deferred Costs, contains four subtopics.The first, ASC 340‐10, Overall, provides guidance on certain deferred costs and prepaid expenses.The second, ASC 340‐20, Capitalized Advertising Costs, provides guidance on the initial measurement, amortization, realizability, and disclosure of direct response advertising costs reported as assets. The specific guidance for many other costs that have been deferred is included in various other financial, broad, and industry Topics. Provide an overview of disclosure requirements. When implementing ASC 340-40, companies should first assess whether the cost in question is covered by other guidance. According to ASC 340, these costs can be capitalized only if the costs are recoverable — the customer will pay for it as the contract is fulfilled over the period — and incremental — they arise only if the contract is signed. ASC 340-40 notes the following in regards to the guidance in this Subtopic: This Subtopic provides accounting guidance for the following costs related to a contract with a customer within the scope of Topic 606 on revenue from contracts with customers: Copyright © 2020 Deloitte Development LLC. All rights reserved. A guide to revenue recognition assists middle-market companies in applying the new revenue recognition model in Topic 606, “Revenue from Contracts with Customers,” of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). Other entities, including private companies, were granted a later adoption date, which has now been extended to years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. I just happened to be driving by with my radio and heard the call, so I … FAS ASC 310-30, when it should be applied, how it should be applied, and provide best practices on implementation. The FASB’s new model, codified in ASC 606, Revenue from contracts with customers, applies to a company's contracts with customers, except for contracts that are within the scope of other standards (e.g., leases, insurance, financial instruments). • Entities that applied ASC 340-10 by analogy should evaluate their NRE costs : under the fulfillment cost guidance in ASC 340-40 upon adoption of the ASU. All software and software-as-a-service companies; Relevant dates. In November 2007, Thailand announced the intention to buy two S 100B AEW aircraft from the Swedish Air Force. 340-30 Insurance Contracts that Do Not Transfer Insurance Risk, 340-40 Other Assets and Deferred Costs — Contracts With Customers, FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 — Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Combinations — SEC Reporting Considerations, Consolidation — Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees — SEC Reporting Considerations, Foreign Currency Transactions and Translations, Guarantees and Collateralizations — SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Multiple-Element Arrangements — A Roadmap to Applying the Revenue Recognition Guidance in ASU 2009-13, Qualitative Goodwill Impairment Assessment — A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Software Revenue Recognition — A Roadmap to Applying ASC 985-605, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. 2014-09 will amend FASB Accounting Standards Codification® (ASC) by creating Topic 606, Revenue from Contracts with Customers and Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. 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