Revenue Recognition

The Financial Accounting Standards Board’s (FASB) accounting standard on revenue recognition, FASB ASU No. 2014-09, eliminates the transaction- and industry-specific guidance under current U.S. GAAP and replaces it with a principles-based approach. The guidance is already in effect for public companies (including certain NFPs and EBPs). With the issuance of FASB ASU No. 2020-05: Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, other entities that have not yet issued financial statements or made financial statements available for issuance as of June 3, 2020 may elect to defer the effective date to be 2020 for annual reporting periods and in 2021 for interim periods. Those entities may also elect to follow the original effective date of annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The resources below can help your firm and clients be ready.

Resources for auditors

Webcast—ASC 606: What Auditors Need to Know (CPE credits: 2)
This webcast will walk you through the five steps to recognizing revenue under ASC 606 and how you can improve your audit quality by avoiding four common missteps.

Documentation example
Use this example of documentation for contracts to help you meet the documentation requirements of AU-C 230. It captures key terms and details from a contract with a customer.

Internal inspection aid
If you review audit work, this resource will help guide you identify non-compliance with AU-C 540 during your firm’s internal inspection. This auditing estimates aid will also guide reviewers on ASC 606 considerations.

Practice aid: Considering management’s estimates within ASC 606
This practice aid walks you through the five steps to FASB’s Topic ASC 606, including associated potential risks of material misstatement, processes where the client should have established controls and examples of audit procedures to address risks.

From the Journal of Accountancy: Challenges to consider in auditing revenue recognition
Learn more about the five steps to FASB’s Topic ASC 606 as well as common missteps to be aware of as you audit your clients.

Resources for auditors to stay independent

As your audit clients look to you for guidance in implementing this new standard, it's critical to keep independence considerations in mind. Here are a few resources to look to for maintaining your independence.

CPEA Report: Helping Attest Clients Implement the New Revenue Standard: Complying with the Independence Rules (Open to non-CPEA members)
This special report from the Center for Plain English Accounting (CPEA) will help in understanding independence boundaries when helping clients with the revenue recognition standard.

From the Journal of Accountancy: How auditors can stay independent while advising on revenue recognition
With the revenue recognition standard in full effect, it may be an instinct to help clients who still feel left behind. The extent of that assistance could impair the firm's independence. Check out some best practices here to avoid crossing the lines of independence.

Journal of Accountancy quiz: Auditor independence and FASB’s revenue recognition standard
How much guidance on the new revenue recognition standard can you offer your clients without compromising your audit independence? Take this quiz to find out how well you know the independence requirements relative to attest clients.

Ethically Speaking Podcast
Give your eyes a break from reading and listen to these podcast episodes in the Ethically Speaking series to learn about what your firm can do to maintain independence while still being a valuable resource for your clients in the revenue recognition implementation process.

Other Resources

Webcasts and CPE courses available or coming soon.

Opportunities with CPE:

Revenue Recognition: Mastering the New FASB Requirements

Interpreting the New Revenue Recognition Standard: What All CPAs Need to Know

Archived webcasts (free, no CPE available):

Subsequent ASUs and FASB Staff Papers

Subsequent to the release of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), FASB issued the following related accounting standard updates and staff papers: