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An update for our clients and friends...
FASB's New Revenue Recognition Standard
How will it impact your business?
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The FASB's new revenue recognition standard, ASC 606, Revenue from Contracts with Customers, will be effective for private companies for annual periods beginning after 12/15/2018 and for interim reporting periods for years beginning after December 15, 2019. Public companies must implement the standard in periods beginning after December 15, 2017. The standard eliminates existing industry-specific guidance and replaces it with a single, principle-based model for recognizing revenue. The core principle requires an entity to recognize revenue in a manner that depicts the transfer of goods and/or services to a customer in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods and/or services. Most entities will see some level of change as a result of the new standard. The standard also creates new disclosure requirements.
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An entity should apply the guidance in ASC 606 to all contracts with customers, except the following:

•   Lease contracts within the scope of ASC 840 or ASC 842, Leases
•   Insurance Contracts
•   Certain Guarantees
•   Nonmonetary exchanges to facilitate sales to customers
•   Financial instruments 
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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
  • Airlines
  • Asset Management
  • Broker-Dealers

  • Construction Contractors
  • Depository Institutions
  • Gaming
  • Health Care
  • Hospitality
  • Insurance
  • Not-for-Profit
  • Oil and Gas
  • Power and Utility
  • Software
  • Telecommunications
  • Timeshare
Working Drafts Available
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.

Click here to download a summary of current issues and their status.
The standard uses the following five-step model:
Step 1: Identify the contract with the customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies its performance obligations.
We recommend you begin developing a project implementation plan, including transition decisions and the new disclosure requirements. Please contact us and we’ll help you with implementation issues specific to your company.
This post is for informational purposes only and not actual professional tax and/or accounting advice. Before making any decision or taking any action, you should consult with a professional advisor about your specific situation.
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LEVITZACKS, CERTIFIED PUBLIC ACCOUNTANTS 619.238.1077