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1 Accounting Standards Codification Topic 606 Revenue from Contracts with Customers RISK ADVISORY MBAFCPA.COM

2 May 2017 Dear Clients and Other Friends, In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No , Revenue from Contracts with Customers (Topic 606 or ASC 606). This ASU introduces a new comprehensive model for revenue recognition, which will replace virtually all of the previously existing revenue recognition guidance in U.S. GAAP. The guidance in Topic 606 must be adopted by public companies for fiscal years beginning after December 15, 2017, and by private companies one year later. The new standard incorporates a single, principles-based accounting model for revenue recognition and disclosures and is focused on control, while the current revenue recognition standard is primarily a model based on risks and rewards. As a result, many companies are encountering significant changes to their historical revenue recognition policies, and the more extensive disclosure requirements are likely to affect all companies. The SEC Staff has commented in recent speeches that the successful implementation of the new revenue recognition standard requires the engagement of senior management throughout an organization, and emphasized that the efforts required and the overall importance of a successful implementation of the new revenue recognition standard should not be underestimated. The SEC Staff further remarked that management s ability to fulfill its financial reporting responsibilities significantly depends on the design and effectiveness of internal control over financial reporting, which encompasses controls designed to provide reasonable assurance that the company s financial statements are prepared in accordance with U.S. GAAP and supports the objective of providing highquality financial information on which investors can rely. We believe that gaining an understanding of the effects of the new standard in every division of a company, thoughtful planning, and collaboration with your auditor and advisors will prove to be instrumental to a successful implementation. Even if you do not expect the new standard will impact your company s revenue recognition, your auditor will require documentation to support that conclusion, including documented conclusions of the assessment of the new standard s impact on the company s revenue streams, processes, internal controls, IT systems, and possibly other company functions outside of accounting, such as sales, operations, FP&A, investor relations, and treasury. We encourage you to get started and remain focused on the ASC 606 implementation process as January 2018 (the effective date for calendar-year public companies) approaches. If you have not started to analyze the impact of the new standard, the time to act is now. We hope that you find this publication provides you with a convenient summary of the new guidance and key differences between current GAAP and Topic 606, and we look forward to assisting you through the ASC 606 implementation journey. Jesus Socorro Managing Principal - Risk Advisory Accounting Standards Codification Topic 606, Revenue from Contracts with Customers

3 TABLE OF CONTENTS THE REVENUE RECOGNITION FRAMEWORK... 1 Step 1: Identify the Contract(s) with a Customer... 2 Step 2: Identify Performance Obligations... 3 Step 3: Determine the Transaction Price... 5 Step 4: Allocate the Transaction Price to the Performance Obligations... 6 Step 5: Recognize Revenue When (or As) the Performance Obligation Is Satisfied... 7 Key Points to Consider in Each Step... 8 Additional Guidance in Topic TRANSITION METHODS AND TIMELINE SIGNIFICANT CHANGES FROM CURRENT GAAP MBAF RISK ADVISORY CAN HELP...14 MBAF RISK ADVISORY OVERVIEW This publication contains general information only and should not be relied upon as accounting, audit, tax, or other advice or guidance. You should consult with MBAF or other professional advisors for specific advice before making decisions. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers

4 The Revenue Recognition Framework The core principle of Topic 606 is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, Topic 606 is built around a five-step framework: Step 1: Identify the contract(s) with a customer. Topic 606 defines the characteristics that need to be met for a contract to permit revenue recognition. Step 2: Identify the performance obligations. Performance obligations represent the things that the seller has promised to do for the customer. Step 3: Determine the transaction price. This step is simple in fixed-price contracts, but Topic 606 also provides guidance regarding when variable consideration, such as performance bonuses, volume discounts, and rebates, should be considered in the contract. The new guidance also discusses the recognition of financing elements embedded in customer contracts. Step 4: Allocate the transaction price to the performance obligations. When there are multiple performance obligations, the transaction price (determined in Step 3) must be allocated to the performance obligations (determined in Step 2). Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation by transferring a good or service to a customer. A performance obligation may be satisfied at a point in time (typically for transfers of goods) or over time (typically for services). To evaluate the pattern or point of satisfaction of a performance obligation, Topic 606 focuses on when the customer gains control of the promised items. Also included in Topic 606 is guidance on the presentation of income statement and balance sheet accounts related to customer contracts. In addition, ASU also introduced Subtopic , Other Assets and Deferred Costs Contracts with Customers, which provides guidance on the accounting for costs related to contracts in the scope of Topic 606. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 1

5 Step 1 Identify the Contract(s) with a Customer Under Topic 606, a customer contract is accounted for when all of the following criteria are met: z The contract has been approved (in writing, orally, or in accordance with other customary business practices) and the parties are committed to perform their respective obligations. z Each party s rights regarding the goods or services to be transferred are specified. z Payment terms for the goods or services to be transferred are set. z The contract has commercial substance (i.e., the risk, timing, or amount of the entity s future cash flows is expected to change as a result of the contract). z It is probable that the consideration entitled in exchange for the goods or services that will be transferred to the customer will be collected. z At least one of the two parties cannot terminate the contract before performance occurs without being required to make a payment for doing so. When a contract does meet the criteria above, the enforceable promises to deliver goods or services by the seller and to pay for those goods or services by the buyer, form the basis for the application of the guidance. Any performance by the seller before a contract meeting, the above terms (e.g., if work begins before the contract is signed) does not result in revenue recognition until a contract exists. Each party has approved the contract and is committed to perform Collectability is probable Attributes of a Contract Each party s rights and obligations are specified The contract has commercial substance Payment terms are set Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 2

6 Step 2 Identify Performance Obligations Under Topic 606, revenue recognition is based on satisfying performance obligations contained in the contract. The first step in identifying performance obligations is to determine the goods and services that the seller has promised to transfer to the customer. For example, the following are common promises in contracts with customers: z Sale of goods produced or manufactured; z Resale of goods purchased; z Resale of rights to compel others to provide goods or services; z Standing ready to provide goods or services as needed or requested (e.g., a snow removal service or a fitness club membership); z Arranging for another party to transfer goods or services to a customer (i.e., acting as a sales agent); z Constructing, manufacturing, or developing an asset on behalf of a customer; z Granting a license to intellectual property; and z Performing one or more tasks. Only those items that are to be transferred to the customer are included in performance obligations. Thus, administrative and other tasks that build the seller s capability to provide goods or services to the customer, but do not transfer any goods or services themselves, are not part of a performance obligation, and revenue may not be recognized when such tasks are performed, even if they are specifically contemplated in the contract. A promised good or service is a performance obligation on its own if it is distinct. If a promised item is not distinct on its own, it must be combined with other promised goods or services to identify a bundle that is distinct. A promised good or service (or bundle of promised goods and/or services) is distinct if both of the following criteria are met: z The customer can benefit from the good or service either on its own or together with other resources that are readily available (the good or service is capable of being distinct). z The promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (the good or service is distinct within the context of the contract). This criterion is not met if multiple promised goods and/or services are used as inputs to a combined item that is then transferred to the customer. If a contract includes a service that is performed repeatedly over time, each instance of the service might be distinct on its own. However, Topic 606 provides that in such a situation, the entire series of repeated instances of the service is treated as a single performance obligation. Each performance obligation is a unit of account to which revenue is allocated. That revenue will then be recognized as the seller fulfills the promises included in the performance obligation. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 3

7 Steps to Identifying Performance Obligations in a Contract Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 4

8 Step 3 Determine the Transaction Price Topic 606 defines the transaction price as the amount of consideration that the seller expects to be entitled to in exchange for transferring the promised goods or services to the customer. While short, this definition clarifies a few key points. 1. By focusing on the consideration to which the seller will be entitled to, the definition clarifies that bad debts are not a reduction of revenue. Revenue will be recognized at the contract amounts, while the inability of the customer to pay will be reflected as an expense if the situation arises. 2. The definition incorporates expectations, clarifying that variability in the transaction price is handled based on expected outcomes, rather than waiting for the uncertainty to be resolved. 3. If the contract with a customer includes in it payments that relate to something other than the transfer of promised goods or services, the amount of revenue must be adjusted to take that into account. When determining the transaction price, consider the following: Fixed Consideration Variable Consideration Existence of a Signficant Financing Component Noncash Consideration Exclude Amounts Collected on Behalf of Third Parties (e.g., sales taxes) Expected Consideration For many contracts, measuring the consideration to be received is simple because the contract states a fixed price. However, many other contracts have prices that vary based on the vendor s performance, the customer s use of the goods or services, future changes in price or value of the goods or services, or other factors. If the amount of consideration that will be due under the contract is variable for any of these reasons, the transaction price should be estimated, and should include any variable consideration that is probable of becoming due under the contract. Those estimates are updated until the uncertainty is resolved. Financing Components Topic 606 requires that the transaction price be adjusted to reflect the time value of money if the contract includes a significant financing component. Often, such a component will exist if payment is either made more than a year before goods or services are transferred or more than a year after goods or services are transferred. If a financing component does exist, a lending transaction, including interest, must be recognized between the time of payment and the time that goods and/ or services are transferred. This will cause the transaction price allocated to the performance obligations to be different than the stated price in the contract. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 5

9 Step 4 Step 4 Allocate the Transaction Price to the Performance Obligations When a contract has a single performance obligation, the entire transaction price is attributed to that performance obligation. However, if multiple performance obligations were identified in Step 2 of the model, the transaction price must be allocated amongst those performance obligations. Generally, the transaction price should be allocated to each performance obligation based on the relative standalone selling prices of the goods or services in the contract. If a good or service is sold separately by the seller for a consistent price, that consistent price is the standalone selling price for purposes of applying Step 4 of the model. When standalone prices are not known because the goods and/or services are not sold on a standalone basis, they must be estimated. Topic 606 does not mandate particular methods for estimating standalone prices, and instead provides examples of potential estimation methods, which include: (a) considering prices charged in the market by other sellers; (b) applying a margin to expected costs of providing goods and/or services; and (c) a residual approach, in which the standalone selling price of a good or service that is not separately sold for a consistent price is estimated by deducting known prices of other goods and services in the contract from the transaction price. A seller is expected to utilize whatever method of estimating a standalone selling price will provide the most faithful estimate in the circumstances. When a contract includes variable consideration, the variable consideration may be attributable to the entire contract or to a specific part of the contract. The estimate of variable consideration (and subsequent changes to that amount) should be allocated entirely to a specific performance obligation or to a portion of the performance obligation that is a series of distinct services if the terms of the variable payment relate specifically to that performance obligation or portion of a series, so long as allocating the variable consideration to that specific item results in a reasonable allocation to other goods and services in the contract. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 6

10 Step 5 Recognize revenue when (or as) the entity satisfies a performance obligation by transferring a good or service to a customer Revenue is recognized when (or as) performance obligations are satisfied by transferring a promised good or service to a customer. Topic 606 bases the determination of when a good or service is transferred on a control principle. Therefore, a performance obligation is satisfied, and revenue is recognized, when (or as) the customer gains control of a good or of the results of a service. A performance obligation may be satisfied at a single point in time (e.g., when a product is physically delivered) or over a period of time (e.g., as a repetitive service is performed). In most cases, revenue will be recognized earlier if the performance obligation is satisfied over time rather than at a point in time. This is because when a performance obligation is satisfied over time, it will generally be satisfied as performance occurs, while a performance obligation settled at a point in time generally will not be satisfied until performance is complete. Topic 606 provides that a performance obligation is satisfied over time if any of the following criteria are met: z The customer simultaneously receives and consumes the benefits provided by the entity s performance as the entity performs. For example, a purchaser of cleaning or painting services receives the benefits as the service is performed. z The entity s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. For example, this is the case if the vendor is working on an asset that is owned by the customer, such as in a contract to put an addition on a house. z The entity s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date. This criterion may be met in contract manufacturing arrangements, as the contract manufacturer likely cannot sell the inventory items to any other customer, and, because of that, may have insisted on contractual terms that guarantee payment for partially produced goods in the event the contract is terminated. When a performance obligation is considered to be satisfied over time, revenue is recognized based on a measure of progress toward complete satisfaction of the performance obligation. A single measure of progress must be used, and the most relevant measurement available should be selected. Methods that can be used to measure progress toward satisfaction of a performance obligation satisfied over time include: z Output methods, which recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred. For example, revenue from a contract to build a road might be recognized based on the proportion of road completed. z Input methods, which recognize revenue on the basis of the entity s efforts to satisfy the performance obligation (e.g., materials consumed, labor hours expended, costs incurred, time, or machine hours) relative to the total expected inputs to the satisfaction of that performance obligation. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 7

11 If a performance obligation does not meet any of the above criteria to be deemed to be satisfied over time, it is considered to be satisfied at a single point in time instead. To determine the point in time at which a customer obtains control of a promised item, the seller should consider when the following indicators, enumerated in Topic 606, exist: z The entity has a present right to payment for the asset; z The customer has legal title to the asset; z The entity has transferred physical possession of the asset; z The customer has the significant risks and rewards of ownership of the asset; and z The customer has accepted the asset. Key Points to Consider in Each step Sale of goods produced Resale of goods purchased Each p Payment terms are set Contract has commercial substance Collectability is probable STEP 1 STEP 2 Resale of rights Sales agent Licensing STEP 5 Recognize Revenue Single performance STEP 4 STEP 3 Determine standalone price Exclude amounts collected on behalf Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 8

12 Additional Guidance in Topic 606 Topic 606 includes a significant amount of implementation guidance that specifically outlines how its principles should be applied to a number of topics, including: z Sales with a right of return; z Warranties; z Principle versus agent considerations; z Customer options for additional goods or services; z Customers unexercised rights (aka, breakage); z Nonrefundable up-front fees; z Licenses of intellectual property; z Agreements to repurchase assets transferred; z Consignment arrangements; z Bill-and-hold arrangements; z Noncash consideration; z Payments to customers; and z Evaluating customer acceptance provisions. In addition, Topic 606 includes over 80 examples that illustrate how the principles should be applied to various fact patterns. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 9

13 Transition Methods and Timeline In the year of adoption, companies can select from two transition alternatives: the modified retrospective transition approach and the full retrospective transition approach. Through the full retrospective approach, companies are permitted to adopt the revenue standard by restating all prior periods following Topic 250, Accounting Changes and Error Corrections. Through the modified retrospective approach, companies will apply the new standard to all existing contracts as of the effective date and to all future contracts. The cumulative effect of initially applying the new standard is recognized in opening retained earnings as of the effective date. Under this transition method, companies only need to consider the effects of applying the new standard to contracts that are not completed as of the effective date. While this allows companies to avoid restating prior periods, the qualitative and quantitative impact of applying the new standard on all affected financial statement line items must be disclosed in the year of adoption. Regardless of the adoption method selected, some level of dual GAAP reporting will be required. Consequently, companies will have to maintain two sets of accounting records and supporting processes for a period of time depending on the method adopted; specifically, two years for full retrospective and one year for modified retrospective and prior (year of adoption) 2019 and beyond Forms 10-K / 10-Q Footnotes Before adoption Presented in 2017 financial statements Legacy GAAP Legacy GAAP Legacy GAAP SAB 74 disclosures Forms 10-K / 10-Q Footnotes Full retrospective approach Presented in 2018 financial statements ASC 606 ASC 606 ASC 606 ASC 250 Expanded Disclosures ASC 606 Cumulative catch-up adjustment at January 1, 2016 Forms 10-K / 10-Q Footnotes Modified retrospective approach Presented in 2018 financial statements ASC 606 Legacy GAAP Legacy GAAP Legacy GAAP Expanded ASC 606 Cumulative catch-up adjustment at January 1, 2018 Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 10

14 Significant Changes from Current GAAP While the guidance for many issues in Topic 606 is similar to the guidance in current GAAP, there are many areas in which Topic 606 s guidance will change practice. In some cases, this is because Topic 606 s requirements are different from those in current GAAP. In other cases, it is because Topic 606 provides guidance on a topic that is not covered in current GAAP, and current practice is either diverse or different from the Topic 606 requirements. The chart below describes some of the significant areas of change. Current Practice Topic 606 Variable Consideration When the fee in a contract is variable based upon future events, such as the achievement of goals or the usage of a product, the variable amounts are excluded from the amount of revenue that can be recognized until they become fixed or determinable, which is generally when the uncertainty is resolved. Variable fees are estimated and included in the transaction price to the extent they are probable of becoming due. As a result, revenue in contracts with variable fees will often be recognized faster under Topic 606 than under current GAAP. Financing Components Current GAAP only speaks to financing components embedded in revenue contracts if there are extended payment terms in the contract. Prepayments are generally not examined to determine whether they provide a financing benefit. Every contract with a significant difference between payment and transfer of goods and/ or services will need to be considered to determine whether a financing component should be identified. Contract Manufacturing Arrangements In general, revenue from manufactured products, even when manufactured for a particular customer, is not recognized until the products are delivered, except in the case of contracts covered by construction accounting guidance. If products are manufactured for a specific customer and the vendor has a right to payment for work performed in the event the order is canceled, revenue may well be recognized during production, rather than only upon delivery. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 11

15 Current Practice Topic 606 Licenses of Intellectual Property Guidance in current GAAP is often industrybased, with specific provisions for software, franchises, motion pictures, etc. In general, however, that guidance provides for recognition of revenue at the beginning of the license term. Revenue on licenses of intellectual property (IP) for which there is not specific guidance is also generally recognized at the beginning of the license term. Topic 606 includes a single model for IP licenses. In general, if the IP has value because it can be used to do something (e.g., software, books, movies), revenue will be recognized at the beginning of the license term. However, revenue from licenses of IP whose value is tied to its connection to the licensor (e.g., trademarks, logos, brand names) will be recognized over the license period. This could be a significant change for companies that generate revenue from licensing their names, images, logos, or characters. Contract Modifications There is currently no guidance on how to handle most contract modifications. Practice is diverse, with most contract modifications being accounted for prospectively, and others by cumulative adjustment, with different companies adopting different treatments, even for similar facts. Topic 606 provides a model for accounting for contract modifications. Generally, if the items transferred under the contract premodification are distinct from those to be transferred post-modification, the effects of the modification are handled prospectively. If, however, a modification occurs when a performance obligation is partially satisfied, a cumulative adjustment will be necessary. Costs of Obtaining a Contract Practice is diverse when it comes to deferring costs of obtaining contracts, as there is only specific guidance in certain industries. Some companies defer sales commissions only. Others defer a portion of fixed costs, including salaries. Others, of course, expense all costs as incurred. Topic 606 requires that incremental costs of obtaining long-term contracts be deferred. Only costs relating to the specific contract acquisition are to be deferred however, without any allocation of salaries or other costs. This will represent a change for many companies. Costs of Fulfilling a Contract Current GAAP provides that costs of certain contracts be recognized in proportion to revenues, ensuring a consistent gross margin. That guidance applies to only a small number of contracts, with cost guidance for other contracts virtually non-existent. Practice on deferring or smoothing costs is diverse as a result. Topic 606 generally requires that costs of fulfilling a contract be recognized as incurred, without smoothing. Fulfillment costs are capitalized if the costs relate directly to performance under a contract and relate to activities that do not fulfill a performance obligation as they are being performed. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 12

16 Current Practice Topic 606 Industry-Based Guidance Current GAAP includes revenue guidance developed specifically for certain industries, including real estate sales, construction, software licensing, franchising, and many other industries. While that guidance provides consistency within the industry, the principles that underlie the guidance in different industries are sometimes inconsistent. Topic 606 replaces all of the industry-specific guidance with a single model, which will result in changes in many industries. For example, revenue from real estate sales and software licenses will generally be recognized faster due to the removal of specific limitations in current GAAP, while franchising revenue will likely be recognized slower, due to the elimination of guidance that allows up-front recognition of initial franchise fees. Balance Sheet Presentation Current GAAP is generally silent on how assets and liabilities related to customer contracts are presented in the balance sheet. As a result, captions such as unbilled receivables, deferred revenue, and deferred costs are used with varying meanings. While Topic 606 does not require the use of specific captions, it does require that assets and liabilities relating to performance under a contract be presented separately from capitalized costs, receivables, and liabilities related to potential refunds. Disclosures There are disclosure requirements for certain revenue transactions, such as multipleelement arrangements. However, there are virtually no disclosure requirements for revenue in general. In practice, the SEC staff has pushed for better revenue policy disclosures over time, but few companies include significant quantitative information about revenue, and the quality and detail of qualitative information varies significantly. Topic 606 requires a significant amount of disclosures of revenue, including information about types of revenue, judgments made in recognizing revenue, information about capitalized costs, expected timing of the recognition of revenue from contracts in process, and other topics. Quantitative information is required in a number of areas. The increased disclosure requirements will affect virtually all companies. Sales of Assets Other than in the Ordinary Course of Business When operating or other assets (other than inventory or financial assets) are sold, revenue recognition guidance doesn t apply. While there is significant guidance on how to recognize sales of real estate, there is little guidance on recognition of gains and losses from sales of other assets. The recognition and measurement of income (or loss) from sales of virtually all assets follows the same principles that apply to recognition of revenue. This will provide for more consistency in the timing and measurement of revenue, expense, gains and losses as compared to current GAAP. Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 13

17 MBAF Risk Advisory Can Help By selecting MBAF to advise management with the adoption of the new revenue recognition standard, your company will benefit from our experience which will prove to be the most effective and efficient way to achieve compliance and have the least amount of impact on your current resources. Although not an all-inclusive list, below are some of the ways we can help. z Deliver training sessions for your team to explain the changes stemming from the new standard z Benchmark your company against peers and others in the industry z Together with management, establish project governance structure and protocols z Identify your company s main revenue streams and document considerations z Identify a representative sample of contracts for each significant revenue stream z Perform an inventory of existing contracts and organize documents within a central repository z Identify the transition method, including consideration of SAB 74 disclosure requirements z Identify which existing accounting policies will be affected by the ASC 606 implementation z Develop materiality considerations z Perform a gap analysis for the provisions of the new standard and disclosure requirements z Develop and document new policies or modify existing accounting policies related to revenue recognition z Assist with the design and documentation of business process changes, including process narratives, flowcharts, and internal control over financial reporting z Quantify the cumulative catchup adjustment and draft journal entries for revenue accounting z Prepare disclosures for the first financial statements using the new standard z Draft white paper for each representative contract z Assess the impact on the company s IT systems and develop solutions to support the data collection necessary under the new standard provisions Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 14

18 MBAF Risk Advisory Overview MBAF s Risk Advisory team is comprised largely of former Big 4 professionals (CPAs, CISAs, MBAs). As a seasoned, accessible, and well-coordinated team, we execute efficiently and with a high level of quality. We have extensive experience with highly complex, technical accounting matters. We have worked successfully with all of the Big 4 firms and other large audit firms, including working with their respective national offices. Our experience encompasses a wide spectrum of projects ranging from assisting emerging growth companies with accounting consultations and policy writing, to large-scale Fortune 500 global internal control projects with complex coordination and execution efforts. Our high quality, dedicated Risk Advisory team has meaningful SEC and PCAOB experience. Knowledge sharing and development are integral to our service delivery. Our investment in knowledge helps our engagement teams operate more efficiently and effectively, and we actively seek opportunities to share that knowledge and thought leadership with your management team. We manage our time in ways that are costeffective to produce value for you, which we believe is derived from: CONTACT: Jesus Socorro Managing Principal - Risk Advisory Jsocorro@mbafcpa.com Keith Urtel Principal - Quality Control Leader Kurtel@mbafcpa.com Miguel Velasquez Principal Mvelasquez@mbafcpa.com Lazaro Gutierrez Director Lgutierrez@mbafcpa.com Emma Florea Senior Manager Eflorea@mbafcpa.com z The unparalleled advantage provided by our team s unique set of skills and experiences from the viewpoint of the external auditor z Significant synergies and collaboration with your external auditor, which allows for maximum leverage of our work in preparation for the external audit z Proactive sharing of relevant and practical thought leadership z A strong, deep bench of professionals, including subject matter resources (IT, valuation, tax, litigation and others) MBAF s Risk Advisory practice creates value for emerging growth, mid-cap, and Fortune 500 companies. z IPO readiness z IT risk z Enterprise risk management z Sarbanes-Oxley z SEC reporting z Technical accounting LOCATIONS: Miami Coral Gables Fort Lauderdale Boca Raton Palm Beach Orlando Naples New York City Valhalla Baltimore Boulder Las Vegas India Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 15

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