It is time to revisit the discussion on changes to revenue recognition. Just to recap, the new standard requires that revenue is recognized when goods or services are transferred to a customer and for the amount the seller expects to be entitled, based on the five step process (not necessarily performed chronologically):
- Identify the contract with the customer
- Identify the separate performance obligations
- Determine the transaction price
- Allocate the transaction price to the individual performance obligations
- Recognize revenue as the performance obligations are satisfied
The new standard is effective for privately held companies for annual reporting periods beginning after December 15, 2018, with early adoption allowed for annual reporting periods beginning after December 15, 2016 (calendar year 2017!) (more…)
By Josh Cross, Senior Audit Manager
ASL Nonprofit Group
Recently the men and women at the Financial Accounting Standards Board (FASB) have been busy providing accountants with no shortage of nighttime reading. In the middle of putting the accounting world on its head with the release of the new Revenue Recognition (Topic 606) and Lease (Topic 842) Accounting Standards, the Not-For-Profit Advisory Committee has been hard at work re-tooling the way nonprofits will have to present their financial statements. (more…)
The new revenue recognition standard, or ASU 2014-09, was issued in May 2014. As we first started digesting the standard, we posted a blog on the 5-step process of revenue recognition (September 10, 2014 post). Due to the sweeping changes associated with this standard, it became clear early on that implementing the new standard was going to be a process. As a follow-up, we included an implementation update in the blog (March 18, 2015 post) but once again, there are more twists and turns for the newly issued standard.
The converged (FASB/IASB) revenue recognition standard was issued in May 2014, and a week later the Boards announced the formation of the “Joint Transition Resource Group for Revenue Recognition.” Given the pervasiveness of the new revenue recognition standard and, for U.S. constituents, migration to the unfamiliar and uncomfortable territory of “principles” over “rules,” it was apparent from the start that implementation issues would abound.
Now that the new revenue recognition guidance is issued, there is nothing left to do but figure out how to implement it. The new standard identifies a five-step process for recognizing revenue. Though it may seem fairly straight forward on the surface, applying the five-step process to your revenue streams may take a significant amount of time and thoughtful considerations. Additionally, your company’s contracts may need to be modified once all the intricacies of the standard have been considered.
By Carol Wagner, ASL Principal
The new accounting standard for revenue recognition is finally here! It’s officially referred to as ASU 2014-09 – Revenue from Contracts with Customers. FASB issued the final revenue recognition standard in May 2014.
The new accounting standard for revenue recognition is finally here! It’s officially referred to as ASU 2014-09 – Revenue from Contracts with Customers. FASB issued the final revenue recognition standard in May 2014. Now, after a couple of months have passed, many technical accounting sources are weighing in on the new standard’s concepts and implementation.
“The new converged revenue recognition standard that’s in the final stages of development by the FASB and the International Accounting Standards Board is expected to lead to at least some changes in financial reporting for virtually all entities that use US GAAP or IFRS.” That’s quite a daunting statement that introduces a Journal of Accountancy (“JOA”) article “Seven Changes New Revenue Standard May Bring.” The impact of this standard will affect companies with billions in revenue as well as privately-held companies. For technology companies, the new principles-based standard throws out the industry specific revenue recognition rules that influenced business practices.
In very early 2014, the FASB expects to release its final revenue recognition standard, which is the culmination of an extensive project started in December 2008 with the publication of its first due-process document for this project. The project was conducted jointly with the IASB (International Accounting Standards Board), and results in largely “converged” U.S. and international accounting standards in the area of revenue recognition.