White paper

Changes to revenue recognition for asset managers

Dec 05, 2018
Audit Revenue recognition Financial reporting Asset management

In May 2014, the Financial Accounting Standards Board issued new revenue recognition guidance that will, upon its effective date, replace most pre-existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles (GAAP). All asset managers whose financial statements are prepared in accordance with U.S. GAAP will be affected by the new guidance. To assist in understanding how an asset manager could be significantly affected by the new guidance, we have prepared a white paper, Changes to revenue recognition for asset managers, in which we discuss the following topics, among others:

  • Determining the customer
  • Accounting for management fee revenue
  • Accounting for management fee waivers and customer expense reimbursements
  • Accounting for incentive or performance fee revenue
  • Accounting for incentive-based capital allocations
  • Recognizing contingent deferred sales charges (CDSC fees)
  • Accounting for deferred distribution commission expenses (back-end load funds)
  • Accounting for the costs of managing investment companies
  • Presenting asset management arrangement revenue gross versus net

While the effective dates for the new guidance are staggered, they are now upon us. With limited exceptions, the new guidance was effective as of January 1, 2018 for public entities with calendar year ends. For all nonpublic entities with calendar year ends, the new guidance is effective in the year ending December 31, 2019. Time is of the essence for these entities given that implementation of the new guidance could represent a significant undertaking in some cases. Our white paper can be a valuable tool in the implementation process to help understand the application of ASC 606 to your customer contracts.

Also, for comprehensive discussion and numerous examples of applying the new guidance, refer to our publication, A guide to revenue recognition.

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