Revenue recognition resources updated for recent developments
FINANCIAL REPORTING INSIGHTS |
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), which added new guidance to the following topics and subtopics in the Accounting Standards Codification (ASC):
- ASC 606, “Revenue from Contracts with Customers”
- ASC 340-40, “Other Assets and Deferred Costs – Contracts with Customers”
- ASC 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”
The FASB has made numerous changes to the new guidance since its issuance. Recently, the FASB issued ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, which clarified that the grantor is considered the customer of the operations services provided by the operating entity in a service concession arrangement within the scope of ASC 853 (refer to our article, Customer of operation services in a service concession arrangement, for additional information). Also, the FASB recently issued a proposed ASU, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, which would (if finalized) clarify when a transfer of assets from a resource provider (e.g., a government) to a not-for-profit entity should be accounted for as: (a) a contribution received in accordance with the relevant guidance in ASC 958-605, “Not-for-Profit Entities – Revenue Recognition,” or (b) an exchange transaction in accordance with ASC 606 (refer to our article, Proposed clarifying guidance for contributions received and made, for additional information).
In addition, the SEC Observer at the FASB Emerging Issues Task Force meeting on July 20, 2017, announced that the SEC staff would not object to entities that are public business entities solely because their financial statements or financial information is included in a filing with the SEC pursuant to SEC rules and regulations (e.g., an acquired private company when its financial statements are included in the acquirer’s filing with the SEC pursuant to Regulation S-X Rule 3-05, Financial Statements of Businesses Acquired or to Be Acquired) adopting the new guidance in accordance with the effective date applicable to private companies (refer to our article, Some PBEs may use private company effective dates for ASC 606 and 842, for additional information).
We have updated the following revenue recognition resources for these recent developments (as appropriate):
- Revenue recognition: Overview of ASC 606, which provides an overview of the new guidance and highlights the fundamental changes the new guidance will bring to accounting for revenue
- Revenue recognition: A whole new world, which is a white paper with detailed discussion of the new guidance that highlights the major differences between the new guidance and legacy generally accepted accounting principles
- Revenue recognition: In motion, which provides information about finalized and pending changes to the new guidance, including the nature of those changes and their status
- Are you sure you know when the revenue guidance in ASC 606 is effective?, which provides additional information about the effective date of ASC 606 and the definition of PBE
Given the fast-approaching effective dates of the new guidance, entities should be well on their way to understanding and implementing the new guidance, especially those that are public entities, as well as those that plan on electing the full retrospective transition method and have multi-year contract terms with their customers.