Proposed Audit and Accounting Guide: Gaming

University of Mississippi eGrove American Institute of Certified Public Accountants Statements of Position (AICPA) Historical Collection 1-1-2008 Proposed audit and accounting guide: gaming; Exposure draft A( merican Institute of Certified Public Accountants), 2008, September 10 American Institute of Certified Public Accountants. Accounting Standards Executive Committee Follow this and additional works at: https://egrove.olemiss.edu/aicpa_sop Part of the Accounting Commons, and the Taxation Commons Recommended Citation American Institute of Certified Public Accountants. Accounting Standards Executive Committee, "Proposed audit and accounting guide: gaming; Exposure draft A( merican Institute of Certified Public Accountants), 2008, September 10" (2008). Statements of Position. 682. https://egrove.olemiss.edu/aicpa_sop/682 This Book is brought to you for free and open access by the American Institute of Certified Public Accountants (AICPA) Historical Collection at eGrove. It has been accepted for inclusion in Statements of Position by an authorized administrator of eGrove. For more information, please contact [email protected]. EXPOSURE DRAFT PROPOSED AUDIT AND ACCOUNTING GUIDE GAMING SEPTEMBER 10, 2008 Issued by the Accounting Standards Executive Committee American Institute of Certified Public Accountants Comments should be received by December 9, 2008, and sent by electronic mail to [email protected] or addressed to Sharon Macey, Accounting Standards, AICPA, 1211 Avenue of the Americas, 19th Floor, New York, NY 10036 Page 1 of 191 Copyright © 2008 by American Institute of Certified Public Accountants, Inc. New York, NY 10036-8775 Permission is granted to make copies of this work provided that such copies are for personal, intraorganizational, or educational use only and are not sold or disseminated and provided further that each copy bears the following credit line: "Copyright © 2008 by the American Institute of Certified Public Accountants, Inc. Used with permission." Page 2 of 191 September 10, 2008 Accompanying this letter is an exposure draft of the proposed Audit and Accounting Guide Gaming. Certain topics not previously included in the 2006 AICPA Audit and Accounting Guide Casinos have been included in this proposed guide. Examples of such topics include the following: a. Guidance for governmental gaming entities b. Illustrative financial statements and footnotes of a governmental gaming entity c. Illustrative guidance when accounting for guarantees d. Guidance regarding The New Jersey Casino Reinvestment Development Authority e. Guidance for currency transaction reporting in the gaming industry Please note that portions of appendixes A, “Independent Auditor’s Report,” and D, “Other Requirements,” of the proposed guide that contain auditing guidance are not included in this exposure draft. In addition, this exposure draft does not include general and specific auditing considerations, analytical procedures, internal control considerations, and reporting. The purpose of the exposure draft is to solicit comments from preparers, auditors, and users of financial statements and other interested parties. The Accounting Standards Executive Committee (AcSEC) invites comments on all matters in the proposed guide and particularly on the issues outlined in the following paragraphs. In their comments, respondents should refer to specific paragraph numbers and include reasons for any suggestions or comments. Incremental Generally Accepted Accounting Principles (GAAP) Issue 1: As explained in the notice to readers of the proposed guide, the previous edition of this guide as of May 1, 2006, contained accounting principles that are not promulgated elsewhere (referred to as incremental GAAP). The 2006 edition of this guide is not superseded because it remains a source of level b GAAP and because the proposed guide brings forward incremental GAAP from the 2006 edition. Appendix G of the proposed guide provides analysis of how and where incremental GAAP guidance from the 2006 edition appears or does not appear in the revised guide. a. In addition to the sections identified in appendix G, are there other sections of the 2006 edition that you believe contain incremental GAAP? If so, what are they? Please refer to appendix G of the proposed guide. Standing of the Proposed Guide in GAAP Hierarchy Issue 2: As explained in the notice to readers of the proposed guide, the 2006 edition of this guide was deemed to be within category b of the hierarchy of sources of GAAP. The proposed guide, when finalized, would be • within category d of the hierarchy of sources of GAAP for nongovernmental gaming entities, set forth in FASB Statement No. 162, The Hierarchy of Page 3 of 191 Generally Accepted Accounting Principles and, because of that, no transition guidance is provided in the proposed guide. • within category b for chapters 1, “Industry Overview,” 2, “Guide Scope and Applicability,” 3, “Overview of Gaming and Gaming Related Revenue,” and 12, “Governmental Gaming Entities,” for governmental gaming entities, set forth in the AICPA’s Statement on Auditing Standards (SAS) No. 69, "The Meaning of Presenting Fairly in Conformity With Generally Accepted Accounting Principles" (AICPA, Professional Standards, vol. 1, AU sec. 411 par. .12). • unless it conflicts with or contradicts Governmental Accounting Standards Board (GASB) pronouncements, governmental gaming entities should also consider the guidance in chapters 4–11 and appendixes A–D, and F of the proposed guide as other accounting literature set forth in SAS No. 69 (AICPA, Professional Standards, vol. 1, AU sec. 411 par. .13). a. Is the explanation clear in the notice to readers? If not, how should the explanation be revised? Please refer to the notice to readers of the proposed guide. Scope of the Guide Issue 3: The scope of the proposed guide expands the scope of the 2006 AICPA Audit and Accounting Guide Casinos. The proposed guide is transaction, not entity based. Therefore, entities other than those traditionally considered gaming entities, such as casinos, to the extent that such entities undertake gaming or gaming related activities (such as gaming equipment manufacturers to the extent that they operate wide area progressive slot machines), would be subject to the guidance in this proposed guide. a. Do you believe the scope of the proposed guide is appropriate? If not, why? Please refer to paragraphs 2.01–2.04 of chapter 2, “Guide Scope and Applicability,” in the proposed guide. Application to Governmental Gaming Entities Issue 4: As explained in the notice to readers and chapter 2, “Guide Scope and Applicability,” of the proposed guide, gaming activities of governmental entities are within the scope of the proposed guide. Boxed text included in the beginning sections of chapters 4–11 explain that guidance in those chapters applies to nongovernmental gaming entities and refers governmental gaming entities to guidance in chapter 12, “Governmental Gaming Entities.” The introduction to chapter 12 explains that governmental gaming entities apply accounting and financial reporting practices. It further explains that unless it conflicts with GASB pronouncements, the guidance in chapters 4–11 and appendixes A–D, and F of the proposed guide is considered “other accounting literature” under the criteria set forth in SAS No. 69. Chapter 12 summarizes some areas of GAAP significant to governmental gaming entities and refers readers to the AICPA Audit and Accounting Guide State and Local Governments for additional guidance that should also be considered by governmental gaming entities. Appendix A Page 4 of 191 of the proposed guide provides illustrative financial statements of a commercial casino and a tribal casino. Certain accounting and financial reporting differences between enterprise funds and discretely presented component units are highlighted using footnotes on the face of the tribal casino illustrative financial statements. a. Does the proposed guide provide sufficient guidance on what applies to governmental and nongovernmental gaming entities? b. Does the proposed guide adequately address areas of GAAP significant to governmental gaming entities? c. Do you have comments on the format or content of the tribal casino illustrative financial statements provided in appendix A? If so, please provide comments. Please refer to chapters 2–12, and appendixes A–D of the proposed guide Base Jackpots Issue 5: The proposed guide includes accounting for base jackpots that have been tentatively identified by the Financial Accounting Standards Board (FASB) staff as incremental GAAP. The incremental GAAP for base jackpots states Base jackpots are charged to revenue ratably over the period of play expected to precede payout; however, if immaterial, they are charged to revenue when established. Any portion of the base jackpot not charged to revenue when the jackpot is paid is charged to revenue at that time. AcSEC believes that no accrual should be made for base jackpots on nonprogressive gaming devices, and that the proper accounting for nonprogressive jackpots is to record the jackpot when won by the customer as part of the normal revenue recognition cycle. AcSEC believes current practice is to not accrue, in accordance with FASB Concept Statement No. 6, Element of Financial Statements and FASB Statement No. 5, Accounting for Contingencies, that no past event has occurred to create a liability and is not aware of any historical practice or precedent to record accruals for jackpots when established. AcSEC

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