B2W Flipbooks

Page | 50 to start gathering the data for disclosures and be able to account for these contracts in accordance with this standard and also legacy GAAP in 2019. The entity must disclose the nature of, and reason for, the change in accounting principle (required new standard). The entity must also disclose the eff ect of any changes in the current reporting period of any fi nancial statement line items related to the cumulative adjustment and an explanation of the signifi cant changes. Entities will also need to decide if they want to use the practical expedient. The entity must disclose what the fi nancial line items would have been reported for 2019 if legacy GAAP had been applied. FULL RETROSPECTIVE TO EACH PRIOR REPORTING PERIOD PRESENTED ASC 606-10-65-1(d)(1) Section (d)(1) is the section that provides the adoption requirement for the full retrospective adoption. This option requires all reporting periods presented in the fi nancial statement to be accounted for in accordance with this topic. However, the entity only needs to disclose the eff ect of the change for prior periods that have been retrospectively adjusted (typically 2018). The entity shall present the cumulative eff ect to the earliest period presented, and shall be refl ected in the carrying amounts of assets and liabilities as of the beginning of the fi rst period presented with off setting adjustment to opening retained earnings. The fi nancial statements for each prior period presented will be adjusted to refl ect application of ASC 606 to all contracts with customers. If it is impractical to determine such years for the prior period adjustment is applicable, the cumulative eff ect will be applied to the earliest period for which the adjustment can be determined. In most cases, non-public entities are only presenting two years. The retrospective application should only include the direct eff ects of the changes due to the new standard. Any indirect eff ects would be included in the year of adoption. An indirect change would include items such as profi t sharing or royalty payment or bonuses based on income. The determination of what is impractical is a matter of judgment. There must be a reasonable eff ort to apply the standard to the prior periods. You are not required to make assumptions about management intent in a prior period if documentation does not exist. Nor are you required to make signifi cant estimates of amounts. The codifi cation allows for the retrospective transition method to have certain practical expedients that an entity can elect as specifi ed below: 1. No need to restate contracts that start and are completed within the same annual reporting period. 2. Use the contract transaction price as of the date of completion rather than estimating the variable consideration in the comparative reporting periods for completed contracts with variable consideration. 3. Will not need to disclose the transaction price that is being allocated to the remaining performance obligations or disclose when the entity expects to recognize the revenue for the reporting periods that are presented before the date of initial application. 4. For contracts that have been modifi ed prior to the start of the earliest reporting period being presented in the fi nancial statements the entity will not need to Transition Method (continued) >

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