Technical Accounting Advisory (ASC 606/842)

Service description

The Financial Accounting Standards Board (FASB) is the sole source of authoritative Generally Accepted Accounting Principles (GAAP) other than SEC issued rules and regulations that apply only to SEC registrants. The FASB Codification is the authority on U.S. GAAP accounting, which is periodically updated with new accounting standards. This service brings your company into compliance with current accounting practices.

Common industries

Any business preparing GAAP financial statements, facing a new transaction its existing policies don't clearly cover.

ROI

Correct adoption avoids restatements and audit friction; the documented position is what your auditors and investors rely on.

Benefit

Publicly traded companies are required to adhere to U.S. GAAP standards in order to investors, regulators, and other stakeholders have access to consistent and reliable financial information, fostering trust in the financial markets. Private companies are not legally required to adhere to GAAP standards, but may benefit from (i) its standardized framework that offers comparability in financial reporting; (ii) its accuracy, reliability, and transparency can improve internal decision-making; and (iii) attractiveness to investors and lenders.

Why get it

Getting a new or complex transaction's accounting treatment wrong creates restatement risk and audit friction; technical accounting advisory documents the position before the transaction is recorded, so the company's auditor and investors can rely on it.

When you benefit

Typically project-based, triggered by a specific event — adopting a new standard, a new type of contract, or an acquisition — rather than a recurring engagement.

What it costs

Usually a project fee, scoped to the complexity of the transaction or standard being addressed.

When you pay

Commonly billed hourly or as a capped project fee, with a position paper or memo delivered as the project's output; payment is typically due on delivery.

Other costs

None beyond the advisory fee, unless the position requires a broader review of related contracts or prior-period transactions.

Risks to know

Reaching the wrong conclusion under GAAP can force a later restatement, and a public company's auditor may not accept a position that isn't well documented. Waiting until close to a filing deadline to address a new transaction narrows the time available to resolve it.

When risks arise

The right time to address a transaction's accounting is before it closes or before a new standard's effective date; a position worked out after the fact, once the transaction is already recorded, is harder to unwind if it turns out to be wrong.

The process

The advisor reviews the transaction or standard, researches the applicable GAAP guidance, and drafts a position paper or accounting memo with its recommended treatment. The company's finance team and its auditor review the position before it's applied to the financial statements.

Your commitment

The company shares the contract, transaction details, or standard in question, and its current accounting policy positions, and makes finance staff available to walk through how the transaction will actually be recorded.

Documents to gather

• The contract or transaction documents raising the accounting question
• Current accounting policies covering the same or a related area
• Prior audit findings or auditor correspondence on the topic, if any

Helpful reading

• Revenue, lease accounting still challenge private companies — Journal of Accountancy
• Initial direct cost and deferred rent under FASB ASC 842 — Journal of Accountancy

Further research

• 15 U.S. Code § 77s(b) — Recognition of accounting standards as "generally accepted"
• SEC Policy Statement 33-8221 — Reaffirming the Status of the FASB as a Designated Private-Sector Standard Setter
• 17 CFR § 210.4-01 — Form, order, and terminology of financial statements (Regulation S-X GAAP requirement)