Revenue recognition under ASC 606: Updated white paper
FINANCIAL REPORTING INSIGHTS |
Our white paper, Revenue recognition: A whole new world, recently was updated to reflect significant changes made by the Financial Accounting Standards Board (FASB) to Topic 606, Revenue from Contracts with Customers, of its Accounting Standards Codification (ASC) since its original issuance in May 2014. Among the topics in the white paper that have been updated to reflect the significant changes made by the FASB are the following:
- Assessing collectibility
- Identifying performance obligations
- Accounting for noncash consideration
- Recognizing revenue on a gross vs. net basis
- Accounting for licenses and rights to use
- Transitioning to the new guidance
In addition, the white paper has been updated to reflect the nature and current status of further changes to ASC 606 that are currently pending.
Implementation of ASC 606 must occur no later than the quarter and year beginning January 1, 2018, for public entities (i.e., public business entities and certain not-for-profit entities and employee benefit plans) with a calendar year end. For all other entities with a calendar year end, implementation must occur no later than the year ending December 31, 2019. While the FASB provided delayed effective dates for ASC 606, it was with the understanding that implementation of that guidance would be a significant undertaking for many (if not most) entities. With more than two years having passed since initial issuance of ASC 606, entities should be well on their way to assessing how it will affect their revenue recognition policies and disclosures and developing an implementation plan. This is particularly true for companies that plan to elect the full retrospective transition method and companies that have multi-year contract terms with their customers.