2018 FAR REVENUE RECOGNITION CHANGES

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    Topic
  • December 30, 2017 at 10:59 am #1688074
    Bianca
    Participant

    I am currently studying the new FAR material with Becker and plan to sit in January 2018. With having taken the older FAR exams in 2017, I am wondering which type of revenue recognition methods will be testable in 2018.

    In the old Becker book it included Completed Contract, Percent of Completion, Installment Sales, & Cost Recovery methods.

    In the new book, out of those 4 methods listed above, I only come across Completed contract & Percent of Completion. Does this mean Installment Sales & Cost Recovery will no longer be testable?

    Thanks

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  • December 30, 2017 at 9:13 pm #1688222
    stran620
    Participant

    I have the same question! I use Wiley & NINJA notes and MCQ. Wiley & NINJA notes updates both removed mention of installment sales & cost recovery method, but I was still seeing them in NINJA MCQ.

    So I emailed NINJA support and Jeff replied saying, “Installment sales are still fine because they are the most conservative and collectability can't be predicted.”

    I was under the impression that collectibility should be considered probable in order to conclude a contract exists under step 1. From KPMG technical handbook.. “Under Topic 606, if collection is not considered probable, an entity cannot record revenue based on its collections unless the criteria in paragraph 606-10-25-7 are met. Further, an entity may not be able to defer any costs, including those incurred before collectibility is probable, if control of the underlying goods or services has been transferred to the customer unless other US GAAP indicates that the entity should record an asset.”

    I also researched guidance high and low and cannot confirm Jeff's reply anywhere. Not to mention that ASC 605 is still listed as related standard in NINJA MCQ answers when it was superceded in its entirety by 606 which does not list installment or cost recovery anywhere.

    December 31, 2017 at 12:52 am #1688272
    Bianca
    Participant

    I️ am glad I’m not the only one concerned. I’ve done my fair share of research and have come across the same I️ formation you’ve listed above. I’m going to trust Becker’s content. The textbook makes zero mention of installment sales, it’s not even listed in the glossary. Whereas in the older version of the textbook I️t has an entire separate distinction regarding when the installment sales method should be used.

    December 31, 2017 at 6:49 am #1688279
    ywadler
    Participant

    I had the same question, Becker's response:

    We use the textbook to cover high-to-medium probability items tested on the CPA exam. We now think that installment sales and the cost recovery method are lower probability so they are still shown on simulations and multiple choice a bit, but they are no longer emphasized in that medium probability range

    Still very confused, they are not part of the sims or mcq in the new materials and revenue recognition modules at all. The new changes and how they are going to be covered is very unclear.

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