The New US GAAP Revenue Recognition Standards
By Tom Parry, Navolio & Tallman LLP
Are your clients ready for the new US revenue recognition standards? FASB Update 2015-14 – Revenue from Contracts with Customers (Topic 606) is effective for non-public entities, including not-for-profit entities, for annual reporting periods beginning after 15 December 2018. The new guidance affects any reporting organisation that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).
Changes under the new guidance include:
- Consistent principles for recognising revenue, regardless of industry and/or geography.
- A cohesive set of disclosure requirements that will provide users of financial statements with useful information about the organisation’s contracts with customers.
- Reporting organisations will identify each of the goods or services promised to a customer, determine whether those goods or services represent a performance obligation, and recognise revenue when (or as) each performance obligation is satisfied.
- Companies will allocate the transaction price to each of the performance obligations in the contract based on the relative standalone selling price of the underlying goods or services, except when a discount or a variable amount of consideration relates entirely to one or more of the performance obligations in the contract.
- Variable consideration will be included in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
To access free resources to help implement the new standards visit the AICPA resources at www.aicpa.org or the FASB resources at www.fasb.org.
Tom ParryGGI member firm
Navolio & Tallman LLP
Advisory, Auditing & Accounting, Tax
San Francisco (CA), USA
T: +1 415 956 1750
Navolio & Tallman LLP is a boutique CPA firm located in San Francisco. Their holistic approach to working with clients, their relationships based on trust, and their advanced accounting and tax expertise are the perfect combination to help clients meet and exceed their goals.
Tom Parry oversees quality control at Navolio & Tallman. He is the immediate past chair of the AICPA Peer Review Board, member of the CA Peer Review and Accounting Principles and Auditing Standards Committees and serves on the Quality Control task force of the US Auditing Standards Board. He also provides peer review and quality control services for other firms.
Published: Auditing, Reporting & Compliance Newsletter, No. 02, Autumn 2019 l Photo: Gabriele Maltinti - stock.adobe.com