Most of the accounting and financial reporting practices of entities undertaking gaming or gaming-related activities (collectively referred to as "gaming entities") are essentially the same as those of other industries. However, some activities of gaming entities are unique.
Developed by leading experts, this guide delivers "how-to" strategies for handling audit and accounting issues common to entities in the gaming industry, so accounts and financial managers can provide high-quality services to their clients. Updated for recent auditing standards, this guide summarizes new standards, guidance and practices, explaining the numerous activities specific to gaming entities and provides information regarding accounting and auditing for many types of gaming industry issues. Also included are illustrative independent auditor's reports and financial statements of both a non-governmental gaming entity and a governmental gaming entity.
Key benefits include:
- Provides important technical guidance, summarizes new standards and practices, and delivers how-to advice for handling audit and accounting issues that will be critical to your success.
- Offers clear and practical guidance on recent developments in areas such as online gaming and governmental gaming entities.
- Includes helpful industry coverage of the New Jersey Casino Redevelopment Authority, currency transaction reporting in the gaming industry, the tribal gaming industry, lotteries, and analytical procedures and internal controls unique to the gaming industry.
- Includes an appendix that highlights FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).
- Includes an appendix that contains the finalized revenue recognition implementation issues specific to gaming entities.
Table of Contents
1 Industry Overview 01-46
Gaming in the United States 01-24
Casino Gaming 01-09
Native American Gaming 10-11
Lotteries 12-16
Other Gaming 17-24
Regulation and Oversight 25-37
Brief Descriptions of the Games 38-46
Table Games 39
Card Games 40
Slot Machines 41-42
Keno 43
Bingo 44
Race and Sports Betting 45
Online Real Money Gaming 46
2 Guide Scope and Applicability 01-04
3 Overview of Gaming and Gaming Related Revenue 01-42
Introduction 01-13
Overview of Transactions in the Casino and the Casino Cage 14-42
Overview of Table Game Transactions 14-32
Overview of Incentive Programs in the Gaming Industry 33-42
4 Jackpot Liabilities 01-10
Background 01
Summary of Selected Accounting Literature 02
Types of Jackpots for Purposes of Accounting for Jackpot Liabilities 03-07
Accounting for Jackpots 08-10
5 Participation and Similar Arrangements 01-09
Background 01-03
Summary of Selected Accounting Literature 04
Analysis of Lease Criteria for Various Pricing Arrangements 05
Conclusions and Income Statement Presentation 06-09
6 Loyalty and Incentive Programs 01-29
Summary of Selected Accounting Literature 01
General Description of, and Accounting for, Loyalty and Incentive Programs 02-12
Discretionary Incentive Programs 03-08
Nondiscretionary Incentive Programs 09-12
Specific Accounting for Various Discretionary Incentives 13-16
Free Play Offered Other Than Through Loyalty Programs 13
Cash or Cash Equivalents Offered Other Than Through Loyalty Programs 14-15
Complimentaries Offered Other Than Through Loyalty Programs 16
Specific Accounting for Various Nondiscretionary Incentives 17-28
Free Play Offered Through Nondiscretionary Loyalty Programs 17-19
Cash or Cash Equivalents Offered Through Nondiscretionary Loyalty Programs 20-21
Complimentaries Offered Through Nondiscretionary Loyalty Programs 22-26
Nondiscretionary Loyalty Programs in Which Customers Have the Option of Choosing Multiple Types of Incentives 27
Incentive Programs That Provide Customers With Designated Status Without Entitling Customers to Any Economic Benefits 28
Financial Statement Disclosures 29
7 Gaming License, Project Development, and Preopening and Start-Up Costs 01-15
Background 01-02
Summary of Selected Accounting Literature 03
Costs to Obtain a Gaming License 04-11
Project Development Costs 12-13
Preopening and Start-Up Costs 14-15
8 Managing Properties for Third Parties 01-21
Background 01-04
Summary of Selected Accounting Literature 05-06
Accounting by the Gaming Entity Managing the Third Party Owned Property 07-15
Gaming Entity’s Costs Prior to Obtaining the Management Agreement 07-11
Gaming Entity’s Costs Related to an Existing Management Agreement 12-14
Financial Statement Classification of Amounts Paid on Behalf of the Managed Property 15
Accounting by the Managed Property 16-19
Disclosures 20-21
9 Guarantees 01-29
Introduction 01
Summary of Selected Accounting Literature 02-27
Initial Recognition and Measurement of the Guarantee 04-13
Income Statement Effect at Initial Recognition 14
Classification of the Contract or Customer Acquisition Cost 15
Subsequent Measurement of the Liability 16-22
Subsequent Measurement of the Asset 23-27
Financial Statement Disclosures 28-29
Applicability of FASB ASC 810, Consolidation 29
10 Long-Lived Assets 01-21
Introduction 01
Summary of Selected Accounting Literature 02-20
Long-Lived Assets to Be Held and Used 03
Triggering Events 04-06
Grouping Long-Lived Assets to Be Held and Used and Related Issues 07-12
Estimates of Future Cash Flows Used to Test a Long-Lived Asset for Recoverability 13-20
Asset Retirement Obligations 21
11 Other Accounting Topics 01-28
Intangible Assets Acquired in a Business Combination 01-04
Jackpot Insurance 05-13
Background 05-07
Characteristics of Jackpot Insurance Policies 08-10
Accounting for Jackpot Insurance 11-13
Gaming Chips and Tokens Liabilities 14-18
Racetrack Fees 19-23
Background 19-21
Accounting for Racetrack Fees 22-23
Segment Reporting 24-26
Uniforms and Other Long-Lived Assets 27
Deferred Income Taxes for Casinos 28
12 Governmental Gaming Entities 01-22
Background 01
GAAP Hierarchy for Governmental Gaming Entities 02-04
Summary of Selected Accounting Literature 05
Basic Financial Statements and Required Supplementary Information 06-12
Resource Flows Between Governmental Gaming Entities and Sponsoring Governments 13-15
Allocation of Assets and Liabilities Within the Financial Reporting Entity 16
Impairment of Capital Assets 17-22
Segment Reporting 22
13 General Auditing Considerations 01-193
Introduction 01-04
Terms of Engagement 05-10
Opening Balances - Initial Audit Engagements, Including Reaudit Engagements 11
An Audit of Financial Statements 12-24
Planning the Audit 14-16
Audit Risk 17-22
Use of Assertions in Obtaining Audit Evidence in the Assessment of Risks of Material Misstatement 23-24
Materiality 25-31
Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement 32-40
Discussion Among the Audit Team 39
Industry Risk Factors 40
Related Parties 41-44
Responsibilities of the Auditor 43-44
Risk Assessment Procedures 45-47
Designing and Performing Further Audit Procedures 48-54
Identification of Significant Risks 52
Analytical Procedures Used in Risk Assessment 53-54
Understanding of Internal Control 55-64
IT Considerations 65-72
Consideration of Fraud in a Financial Statement Audit 73-111
Introduction 73-75
Professional Skepticism 76-77
Discussion Among the Engagement Team 78-81
Incentives or Pressures 82-84
Opportunities 85-86
Attitudes and Rationalizations 87
Misappropriation of Assets 88-91
Risk Assessment Procedures and Related Activities 92-95
Identification and Assessment of the Risks of Material Misstatement Due to Fraud 96-99
Responses to the Assessed Risks of Material Misstatement Due to Fraud 100-102
Evaluation of Audit Evidence 103-107
Auditor Unable to Continue the Engagement 108
Communications to Management and With Those Charged With Governance109-110
Documentation 111
Consideration of Laws and Regulations 112-117
Responsibility for Compliance With Laws and Regulations 113-117
Audit Performance and Execution 118-126
Designing and Performing Further Audit Procedures 118-126
Timing of Audit Procedures 127-130
Analytical Procedures Used in Audit Performance 131-135
Audit Documentation 136-143
Timely Preparation of Audit Documentation 139-142
Assembly and Retention of the Final Audit File 143
Auditor’s Consideration of Using the Work of Internal Auditors 144
Using the Work of Other Specialists 145-149
Evaluation of Misstatements Identified During the Audit 150-151
Written Representations 152-160
Written Representations as Audit Evidence 153-160
Communication With Those Charged With Governance 161-166
Auditor’s Consideration of Going Concern 167-182
Risk Assessment Procedures and Related Activities 171-172
Additional Audit Procedures 173-174
Consideration of Conditions and Events 175-176
Auditor Conclusions 177-180
Communicate With Those Charged With Governance 181
Documentation 182
Group Audit Engagements 183-188
Definition of a Component 186-187
Group Audit Technical Practice Aid 188
Other Information, Supplementary Information, and Required Supplementary Information 189-193
14 Special Auditing Considerations 01-52
Cash Balances and Revenue Cutoff 02-06
Components of Cage Accountability 03-04
Cage Procedures 05-06
Tests of Accountability 07-13
Cutoff Procedures 14-22
Table Games 16-17
Slot Machines 18-19
Other Games 20-22
Online Gaming 23
Drop and Count Procedures 24-27
Receivables 28-31
Background 28-31
External Confirmation of Gaming Receivables 32-45
Mail Circularization 42
Oral Responses 43-44
Alternative Procedures When No Reply Is Received 45
Branch Offices 46
Allowance for Doubtful Accounts 47-52
Special Considerations for New Gaming Operations 49
Unannounced Audit Procedures 50-52
15 Internal Control 01-53
Introduction 01-08
Gaming Internal Control Considerations 09
Granting and Control of Credit 10-15
Approval of Credit Lines and Maintenance of Credit Files 10
Issuance of Credit 11-12
Recording of Credit Transactions 13
Custody of Markers 14-15
Bingo 16-19
Cage 20-22
Card Games 23-25
Gaming Tournaments 26
Information Technology 27-30
Keno 31-34
Lotteries 35-37
Promotions and Incentive Programs 38
Race and Sports Book (for Computerized Systems) 39-43
Slot Machines 44-49
Table Games 50-53
16 Analytical Procedures 01-12
Introduction 01-04
Types of Analytical Procedures 05-12
Table Games and Poker 10-12
Appendix
A Category B Guidance
B The New Revenue Recognition Standard: FASB ASC 606
C Illustrative Financial Statements
D Illustrative Guidance When Accounting for Guarantees
E The New Jersey Casino Reinvestment Development Authority
F Currency Transaction Reporting in the Gaming Industry
G Rules of the Games
H Overview of Statements on Quality Control Standards
I The New Leases Standard: FASB ASC 842
J Revenue Recognition Implementation Issues
K Schedule of Changes Made to the Text from the Previous Edition
Glossary
Index of Pronouncements and Other Technical Guidance
Subject Index
