SEC updates guidance on revenue recognition
FINANCIAL REPORTING INSIGHTS |
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which, upon its effective date, replaces most pre-existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. As a result, the SEC recently updated its interpretive guidance regarding revenue recognition by releasing the following:
- Staff Accounting Bulletin (SAB) No. 116, which brings existing SEC staff guidance into conformity with the FASB’s adoption of and amendments to Topic 606, “Revenue from Contracts with Customers” of the FASB’s Accounting Standards Codification (ASC). SAB 116 modified SAB Topic 13, Revenue Recognition, and SAB Topic 8, Retail Companies, to note these Topics are no longer applicable. SAB 116 also modified Section A, “Operating-Differential Subsidies,” of SAB Topic 11, Miscellaneous Disclosure.
- Interpretive Release No. 33-10402, Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements, which updates SEC guidance for bill-and-hold arrangements by stating that, upon adoption of ASC 606, registrants no longer should refer to the criteria in Accounting and Auditing Enforcement Release No. 108, In the Matter of Stewart Parness, to recognize revenue for such arrangements.
- Interpretive Release No. 33-10403, Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile, which updates related 2005 guidance and states that, consistent with ASC 606, manufacturers should recognize revenue for vaccines placed into the Vaccines for Children Program and the Strategic National Stockpile.
The above updates apply upon a registrant’s adoption of ASC 606, and until such time, registrants should continue referring to the extant guidance. Implementation of ASC 606 must occur no later than the quarter and year beginning January 1, 2018, for public entities with a calendar year end. Public entities include public business entities and certain not-for-profit entities and employee benefit plans. For all other entities with a calendar year end, implementation must occur no later than the year ending December 31, 2019.
Information regarding the FASB’s new revenue recognition guidance is available in our Revenue Recognition Resource Center.