You can then determine if you will need to make any changes in the level of tracking information due to lower aggregation. DisclosuresĮven if your contracts don’t have any areas with increased judgment, you still need to review the required disclosures and determine what the new requirements are. If your contracts contain any of these types of activities, it’s important to dig deeper into the accounting guidance to make sure you fully understand any potential changes to your revenue recognition. What type of consideration is included, and is there any variable consideration?ĭo you normally provide implicit price concessions or incentives?ĭo you provide loyalty programs, including tier status?ĭo the promises in the contract contain significant integration?ĭoes it contain termination for convenience clauses?Īre there generally multiple contract modifications?Īre there options for the customers to purchase additional products?ĭo you normally account for contracts as a group, as opposed to on an individual basis? Some things to think about when reviewing your contracts: To evaluate the impact to your company, it’s important to focus on areas of the revenue recognition model with increased judgment and determine if these areas are applicable to your contracts. The new revenue recognition standard has lots of new estimates and related disclosures. Check out the AICPA’s updated learning and implementation plan and tax brief. Keep in mind there are implications for tax, internal audit, sales operations, IT, legal and human resources. Implementing the new revenue recognition standard. Identify who in your company will become experts and take the lead on understanding and To help you get started here are several key things to remember: Make a Plan Additionally, it also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. It’s important to remember this guidance supersedes the revenue recognition requirements in FASB ASC 605, Revenue Recognition, and most industry-specific revenue recognition guidance. This is a wakeup call, and not an opportunity to hit the snooze button Private companies still have some time as the guidance is effective in 2019 for annual reporting periods, and in 2020 for interim periods. Public entities are well underway with adoption of the new revenue recognition standard, as the new guidance is effective for interim and annual periods in 2018. The accounting standard that needs your attention right now is the new revenue recognition model, issued as FASB ASU 2014-09 with subsequent amendments. We realize you’re busy, but that doesn’t mean you can keep hitting the snooze button on the Financial Accounting Standards Board’s (FASB) accounting standards that will soon come into effect for everyone.
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