Gaming entities face unique challenges in applying the new revenue recognition standard, Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), due to the variety of revenue streams common in the industry. While the Financial Accounting Standards Board (FASB) recently addressed one issue, several others remain.
The new revenue guidance supersedes the portion of the existing guidance in ASC 924, Entertainment – Casinos related to revenue recognition. However, the new revenue standard doesn’t include explicit guidance similar to current U.S. generally accepted accounting principles, which specifically identifies fixed-odds gaming contracts—defined as “the net win from gaming activities, which is the difference between gaming wins and losses before deducting costs and expenses”—as revenue. Gaming entities were concerned about the lack of clear guidance and wondered whether they should analogize to the international accounting standards approach that accounts for certain gaming activity as derivatives rather than revenue. The proposed guidance is meant to help FASB clarify whether fixed-odds wagering contracts are in the scope of the new revenue standard or should be accounted for as derivatives within the scope of Topic 815, Derivatives and Hedging.