Contractor A & A Update: ASC 606 Rev. Rec. lessons learned to How to Avoid Rev. Rec.ASC 606, Revenue from Contracts with Customers, aka Rev. Rec., is the most dramatic and difficult change in A & A in memory for the construction industry. Contractors and their advisors must make the decision to implement the new GAAP, or not, now. ASC 606 is applicable for non-public entities for calendar year 2019. If implementation is decided, the contractor must develop the internal systems needed for the data. If the contractor is instead going to employ the AICPA accounting framework, the FRF for SMEs, it must obtain the bank and surety permission. The employment of the AICPA framework means little, if any, changes or increased costs. The contractor’s owners should understand what these two choices entail. Rev. Rec. comes at a high cost in increased CPA fees and in internal system support. Large contractors with contracts, operations in numerous states must most likely follow GAAP. On the other hand, just about every other contractor does not.Subject Matters and Learning Objectives:• Summary of significant judgements necessary to recognize revenue from contracts• Rev. Rec. new vocabulary and concepts• Practical discussions on identifying performance obligations, transaction prices, variable considerations, constraining estimates, contract modifications, uninstalled materials, non-cash considerations, contract schedule preparation, and disclosures• Summary of what will be different from what you do now• Summary of tax implications• Available guidance and disclosure from public construction company filings and issues that will be applicable to non-public that were not for public• How to implement AICPA FRF for SMEs (names of financials, disclosures, schedules of contracts)• What permission must be obtained from the contractor’s bank and surety and when (now)Contractor Tax Update: The dramatic new contractor tax issues for 2018 and beyondContractor tax return preparation for 2018 is certainly “one for the records”. While IRS 1120Ss and 1065s look similar to prior years, the new disclosure lines and issues for (a) 199A for QBI, W-2 wages, UBIA; (b) Interest limitation of 163(j) for calculations of ATI, excess taxable income, excess business interest excess business interest expense, to (c) 461(l) $500k loss limitation is not. While the 1120S and 1065 look the same, the 1040s do not, resulting in business owners asking how they should review their 1040s. Another bomb from the TCJA is the potential for tax method changes for contractors.Subject Matters and Learning Objectives:• What we have learned about 199A• Interest expense considerations for contractors and related real estate ownership• Business loss limitations and its interaction with 179 or 481(a) deductions from method changes• TCJA tax method changes keys for contractors: how to, what to pay attention to, how to calculate 481(a)s or not, and key TCJA methods of change away from accrual, 263A, inventory, and/or PCM• Other “must not miss” tax method changes for contractors over $25MM in average annual gross receipts

IRS - 3115 Update