Changes coming for software and software as a service revenue recognition
INSIGHT ARTICLE |
The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued substantially converged final standards on revenue recognition. The FASB's Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), provides a robust framework for addressing revenue recognition issues. This new framework will replace virtually all of the guidance previously applied by companies that sell software and provide SaaS, including Subtopic 985-605, “Software – Revenue Recognition,” of the FASB's Accounting Standards Codification. Applying the new guidance to software and SaaS arrangements could significantly affect the timing and amount of revenue recognized.
Even though delayed effective dates are provided in the ASU, it is not too early to gain an initial understanding of how revenue recognition for companies that sell software and provide SaaS could be affected by the new guidance. To help you gain this understanding, read our summary, Changes coming for software and software as a service (SaaS) revenue recognition, located at Revenue recognition: Industry insights.