Revenue recognition: Overview of ASC 606
We have prepared a white paper, Revenue recognition: Overview of ASC 606 , which provides a high-level summary of the guidance in Topic 606, Revenue from Contracts with Customers, of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). The guidance in ASC 606 was originally issued by the FASB in May 2014 in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Since then, the FASB has issued several ASUs that have revised or clarified the guidance in ASC 606. In addition, several more changes that are less pervasive are pending as a result of proposed ASUs having been issued, but not yet finalized, by the FASB. Our white paper provides a high-level summary of the guidance in ASC 606 (as amended) and highlights many of the fundamental differences between ASC 606 and legacy U.S. generally accepted accounting principles.
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.