Entities that operate in the construction industry often are subject to contracts that contain retainage provisions. Those provisions generally provide a form of security to the customer by allowing the customer to withhold a portion of the consideration billed by the entity until certain project milestones are met or the project is completed.
On April 1, 2025, the Financial Accounting Standards Board (FASB) staff issued an educational paper, Topic 606: Presentation and Disclosure of Retainage for Construction Contractors, in response to feedback from private construction company financial statement users who observed that Topic 606's presentation and disclosure requirements can obscure retainage information due to the netting of contract assets and liabilities.
To continue to assist construction entities in applying the revenue recognition model in Topic 606, Revenue from Contracts with Customers, of the FASB's Accounting Standards Codification, we have updated our Revenue recognition for construction contractors Financial Reporting Insights publication with information from the FASB educational paper.
