Response
Maree29
Response.docxEdwin Quansah
1 posts
Re: Topic 3 DQ 2
Verint Systems (VRNT) is one of the software companies that have been implementing the new guidelines. As such, the firm is currently facing the impact of the new imperative owing to the long-standing nature that cloud software has on recurrent income agreements. For instance, the preceding guiding principle recognized income from software accreditation agreements of which the payment is made in installment over 12 months merely acknowledged when the individual client has been allocated every imbursement (FASB, 2014). However, the new principles imply a change whereby the contracted revenue is acknowledged when the software license control has been transferred (Weirich et al., 2017). In 2018, VRNT acknowledges additional revenue of around $48 million, which was a report of 4% of the total or gross revenue and a representative of 50% in the growth of revenue owing to the new rule (SEC., 2020). Hence, financial reporting shows that the company adopted the new guidelines.
References
FASB, (2014). Update No. 2014-09—Revenue from Contracts with Customers (Topic 606) Section A—Summary And Amendments That Create Revenue From Contracts With Customers (Topic 606) And Other Assets And Deferred Costs—Contracts With Customers (Subtopic 340-40). Retrieved from https://www.fasb.org/cs/ContentServer?c=Document_C&cid=1176164076069&d=Touch&pagename=FASB%2FDocument_C%2FDocumentPage
SEC., (2020). Form 10-K Verint Systems Inc.10-K - Annual report [Section 13 and 15(d), not S-K Item 405]. Retrieved from https://sec.report/Document/0001166388-19-000013/
1 posts
Re: Topic 3 DQ 2
Hello class,
-identify the contract with the customer
Identify the performance obligations in the contract
Determine the transaction price
A; pate the transaction price to the performance obligation.
Recognize revenue when the entity satisfies the obligation
According to the Revenue Recognition section of Note 1, Nature of Operations and Summary of Significant Accounting Policies of Nordstrom’s 2020 SEC 10K report, they recognize revenue net of estimated returns and excluding sales tax. Revenue from their sales to customers is recognized at shipping point, the point when control has transferred to the customer. Cost to ship orders are expensed as a fulfillment activity at shipping point. Commissions from sales at the full price locations are expensed at the point of sale ((Nordstrom, NC., 2020). Sales and Cost of sales are reduced by an estimate of customer merchandise returns which is calculated based on historical patterns (Nordstrom, Inc., 2020). Nordstrom records a sales return allowance and an estimated returns asset. Sales return is classified in other current liabilities and estimated return asset is classified in prepaid expenses (Nordstrom, Inc., 2020). In Note 3, Revenue of the report, Nordstrom states that contract liabilities represent their obligation to transfer goods or services to customers and include deferred revenue for the Nordy Club, Nordstrom Notes and gift cards.
In the first quarter of 2018, Nordstrom adopted ASU 2014-09 utilizing the modified retrospective approach which means they did not recast the prior data to reflect the new standard. Because of the new standard. Prior to 2018, shipped revenues were recognized upon estimated receipt by the customer and an estimated in transit allowance was recorded for orders shipped but not yet received by the customer (Nordstrom, Inc., 2020). This is now recorded as an expense as stated in the paragraph above. Also prior to 2018, Nordstrom neted the estimated cost of merchandise returned with sale return allowance in other current liabilities. This is now reflected in prepaid expenses.
Nordstrom also has a loyalty program where customers earn reward points. As customers earn points a portion of underlying sales revenue is deferred based on an estimated standalone selling price. Revenue is recognized when the points are redeemed. Prior to 2018, Nordstrom estimated the net cost of points to be redeemed and issued and recorded this cost as points were accumulated. Along with this cost, reimburse alterations was recorded in cost of sales as service was provided (Nordstrom, Inc., 2020).
References
Financial Accounting Standards Board (2014). Revenue from contracts with customers. Retrieved from fasb.org
Securities & Exchange Commission (2020)). Nordstrom 2020 Form 10KK SEC report. Retrieved from sec.gov
1 posts
Re: Topic 3 DQ 1 LR
Hello,
The article by Howieson provided a lot of information. The agenda formation process is a long process that is not well known. The article introduces the technical agenda as the focus for the accounting standards setters. The process of getting on the agenda is the first part of the process, other parts include identifying alternatives, an authoritative choice among the alternatives, and the implementation of the decisions. According to Howieson, the process is reactive instead of proactive (2009). This is something that I believe is hard to get away from. I believe that the accounting standard setters are doing a good job at addressing some issues as the issues appear. For example, with this pandemic the board is comminuted to assisting stakeholders (FASB, 2020). On April 21, 2020, the board proposed updates to two topics, which were Topic 606 Revenue from Contracts with Customers and Topic 842 Leases (FASB, 2020).
Lobbyist should be a just a role, a role in which lobbyist can suggest different topics to be added to the agenda that need to be addressed. I think that they should be allowed to state their side of why the topic needs to be addressed to the standard setters in an official setting. I do not think that the lobbyist should be allowed to talk with the setters individually as this could lead to potential bribes. This is because I do think that it important for setters to hear from all sides that the standard may affect. In order for the process to be effective the setters need to be neutral If setters are not neutral lobbyist can affect the outcome of the how significant an issue is which could lead to standards having major effects on a company’s financial reports.
Financial Accounting Standards Board (2020). Revenue from Contracts with Customers Topic 606 and Leases Topic 842. Retrieved from https://asc.fasb.org/imageRoot/21/123344821.pdf
Howieson, B. A. (2009). Agenda formation and accounting standards setting: lessons from the standards setters. Accounting & Finance, 49(3), 577–598. Retrieved from https://doi-org.lopes.idm.oclc.org/10.1111/j.1467-629X.2009.00299.x
