Changes are Coming – FASB has Issued New Revenue Recognition Standard
The Financial Accounting Standards Board has just issued the new revenue recognition standard that has been heavily debated over the last decade. This standard is one of the most significant changes that has been issued in several years. Currently, there are over 100 methods of accounting for revenue recognition, depending on industry-specific guidance. ASU 2014-09 is going to reduce it down to one method and will be the universal standard for revenue recognition, regardless of the industry in which your company operates (except for insurance contracts or lease contracts). We are expecting significant changes for companies currently using industry-specific guidance such as construction companies while other companies may not have any material changes in their revenue recognition policies. We are currently evaluating the effects of this new standard and will be sending out additional information as it becomes available.
For nonpublic entities, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. A nonpublic entity may elect to apply this guidance earlier, subject to the provisions of ASU 2014-09.
You can download a copy of ASU 2014-09 at www.fasb.org.
Due to its length, it was issued in three parts:
- Section A-Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40)
- Section B-Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables
- Section C-Background Information and Basis for Conclusions
Here are links to additional discussion on this new standard:
If you have any questions about this new standard, please contact one of the partners at Melton & Melton at 281-759-1120.