Revenue from Contracts with Customers
On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. This standard has the potential to affect every entity’s day-to-day accounting and, possibly, the way business is executed through contracts with customers.
Subsequent to the release of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), FASB issued the following related accounting standard updates and proposed updates:
- Update 2015-14 - Deferral of the Effective Date
- Update 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
- Update 2016-10 – Identifying Performance Obligations and Licensing
- Update 2016-11 – Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update)
- Update 2016-12 – Narrow-Scope Improvements and Practical Expedients
- Update 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
The Financial Accounting Standards Board (FASB) has launched a new webpage, Implementing New Standards that addresses why and when the FASB positions organizations for a successful and smooth transition to new financial accounting and reporting standards.
The AICPA has developed the following new resources for understanding and implementing the new standard.
Financial Reporting Brief: Tax Effects of ASU 2014-09
This Financial Reporting Brief acknowledges that this standard will have a large impact on the financial reporting standards of almost every company (public, private, and not-for-profit). But, what tax consequences could also result? The brief examines this question.
Financial Reporting Brief: Roadmap to Understanding the New Revenue Recognition Standards
The Financial Reporting Brief reorganizes the guidance contained in FASB ASC 606 (revenue recognition standard), to follow the five step revenue recognition model along with other guidance impacted by this standard. Additionally, it highlights differences between FASB ASC 606 and IFRS 15, and provides reference to applicable examples in the implementation guidance.
New Revenue Recognition Accounting Standard—Learning and Implementation Plan
Use this roadmap to ensure that your company as well as its management team and staff do the following:
- Understand the changes to current GAAP based on FASB ASU 2014-09, Revenue from Contracts with Customers
- Understand transition and retrospective adoption of the revenue recognition standard, and determine how your company will adopt the new guidance
- Find resources to help train your professional staff to ensure effective and efficient implementation of the revenue recognition standard
- Educate users about the changes they can expect in your company’s financial statements
Because the revenue recognition standard will eliminate the transaction- and industry-specific revenue recognition guidance included in current GAAP and replace it with a principle-based approach, it is important for audit committees to gain an understanding of the standard and how it may impact the entity’s revenue recognition. This document will assist audit committees in ensuring the entity is prepared to adopt the standard.
Industry Task Forces
The AICPA has formed sixteen industry task forces to help develop a new Accounting Guide on Revenue Recognition that will provide illustrative examples for how to apply the new Revenue Recognition Standard. The industries involved with this project are:
- Aerospace and Defense
- Asset Management
- Construction Contractors
- Depository Institutions
- Health Care
- Oil and Gas
- Power and Utility
Based on the work of the industry task forces and review of the AICPA’s Revenue Recognition Working Group, the AICPA’s Financial Reporting Executive Committee (FinREC) has issued several working drafts of accounting issues related to the implementation of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and is requesting your feedback.
Download a summary of current issues and their status.
AICPA Resources - Publications, Webcasts and CPE
The AICPA has the following titles under production.
- AICPA Alert Understanding Revenue Recognition: Changes to U.S. GAAP
- AICPA Audit and Accounting Guide Revenue Recognition - This guide includes general accounting and auditing information to be considered when implementing the new revenue recognition standard as well as industry-specific considerations.
- Webcast (free archive) - Understanding the New Revenue Recognition Standard
- CPE - Interpreting the New Revenue Recognition Standard: What All CPAs Need to Know
- CPE - IFRS: Revenue Recognition (part of the IFRS Certificate Program)
- CPE - Revenue Recognition: Mastering the New FASB Requirements