The transition date for the new revenue recognition standards (ASC 606 and IFRS 15 Revenue from Contracts with Customers) is quickly approaching for private companies! Although it's already applicable for public business entities, private companies are (finally) starting to look at the potential impacts of transition. At GAAP Dynamics, we’ve been following the new standard since before it was final! You may have seen the topic pop-up in our recent blog posts…or perhaps you haven’t. If you fall in the latter category, no worries. This blog post has you covered! In this post, we recap some of our latest blog posts, summarize our online learning solutions, and point you to accounting resources we use for keeping up to date on the new standard.
Updated: September 7, 2018
Our Blog Posts
Step-by-Step – Differences in ASC 605 / SAB 104 and ASC 606
This series of posts examines each step in the new five-step revenue recognition model and compares the new guidance to the old guidance under ASC 605 / SAB 104. Each step includes a series of practical examples or questions that reviews the proper accounting under the old standard and highlights how the answer will change under the new standard.
- Step 1 – Identify the contract (November 17, 2015)
- Step 2 – Determine the Performance Obligations (November 25, 2015)
- Step 3 – Determine the Transaction Price (December 1, 2015)
- Step 4 – Allocate the Transaction Price to the Performance Obligations (December 8, 2015)
- Step 5 – Recognize Revenue (December 15, 2015)
Comparing the New Revenue Recognition Standards: IFRS 15 and ASC 606 (August 30, 2016)
As originally issued, IFRS 15 and ASC 606 were very similar with very little difference between the two standards. However, four ASUs later, the standards are moving further apart. This post will take a look at some of the main differences between the two standards as a result of the new guidance.
Technical Corrections to ASC 606: The New Revenue Recognition Standard (February 14, 2017)
The FASB issued ASU 2016-20 to clarify several inconsistencies that stakeholders pointed out through the Revenue Recognition Transition Resource Group (TRG) or other feedback mechanisms. This ASU addresses 13 specific issues, but in the interest of being as brief as possible, this post only covers what we believe are the more significant or pervasive corrections covered in ASU 2016-20.
Five Nuggets from the SEC About ASC 606 Transition (February 21, 2017)
What does the SEC have to say about transition to ASC 606? Do they have any insight, particularly related to compliance with their reporting requirements? Well, they have provided some recent comments. In this post we focus on five of those insights, or “nuggets”, shared by the SEC at the AICPA Conference held in December 2016.
Who gets into a disagreement with a prospective client about application of accounting at a trade booth? Me, that’s who! But I had a good reason. She was misinterpreting the revenue recognition criteria within the new revenue standard (ASC 606 and IFRS 15) and I had to save her from herself (and her auditors). This post explores the concept of control within the new standards.
A Shortcut For Implementing The New Revenue Standard (ASC 606 / IFRS 15)? (October 17, 2017)
It came to our attention that companies were sampling their various revenue contracts in order to transition to ASC 606. Is this allowed? This post explores our research into the subject based on an actual participant question on the topic.
Goodbye ASC 605, Hello 606! Five Non-Revenue Impacts (July 21, 2015)
When switching from ASC 605 to the new revenue recognition standards (ASC Topic 606 or IFRS 15), do you believe the switch only affects revenue? Many believe this to be true, which is not unreasonable given the new standards are titled Revenue from Contracts with Customers. However, these new, principles-based accounting standards also introduce guidance that will directly impact many areas of financial reporting, not just when and how companies record revenue. And these might lead to differences in your current accounting practices. This post takes a look at some of the non-revenue impacts of the new standards.
Principle vs Agent GAAP Revenue Recognition Criteria (ASC 606) (April 4, 2017)
Should you report revenue gross as a principal or net as an agent? This post provides an overview of the principal vs agent guidance within ASU 2016-08, Principle versus Agent Considerations (Reporting Revenue Gross versus Net).
Shipping and Handling: New Revenue Recognition Standard (ASC 606) (March 14, 2017)
Do you look at the cost, or lack thereof, related to shipping and handling when you purchase goods online? In other words, do you value shipping and handling services provided by sellers or resellers of goods? Do you think it should it be considered a separate performance obligation by the seller under the new revenue recognition standard (ASC 606)? In this post, we cover the accounting for shipping and handling activities, specifically whether they should be treated as separate performance obligations.
PCAOB Staff Alert No. 15 - Auditing the Revenue Recognition Standard (October 24, 2017)
The PCAOB released Staff Practice Alert No. 15, Matters Related to Auditing Revenue from Contracts with Customers. Although SAPAs do not represent authoritative guidance, they highlight any new, emerging, or otherwise important circumstances that may impact how auditors perform their audits. However, we believe this SAPA represents a great roadmap for companies about how to prepare for the audit of their implementation of the new standard. This post provides an overview of SAPA No. 15.
Taxes and the New Revenue Recognition Standard (ASC 606) (December 5, 2017)
Since the new revenue recognition standards were released, accounting departments have been spending countless hours working to understand and implement the new rules. But what effect will the new standard have on tax returns and taxable income? This post summarizes how the changes under the new revenue recognition standard (ASC 606) may impact tax filing and compliance.
Gunga Galunga: Accounting for Nonrefundable Initiation Fees under ASC 606 (January 23, 2018)
I’m eating lunch at a dive bar in the Himalayas and who sits down to eat with me? The Dalai Lama himself. Twelfth son of the Lama. The flowing robes, the grace, bald…striking. So, we order our lunch – big eater, the Lama – and, as he’s wolfing down his yak tacos, he asks me about the accounting for upfront, nonrefundable initiation fees. Specifically, he wanted to know if adopting ASC 606 Revenue from Contracts with Customers would impact the accounting policies of his local golf club. This post recaps our conversation!
Examining Contracts under ASC 606: Material Rights (May 8, 2018)
Since the issuance of ASC 606, accountants have worked to understand the new 5-step model and its affect on their companies. Step 2 has proved the most difficult, especially if an entity does not have standard contract terms, the contract contains multiple products or services, or if there are options included for the acquisition of future products or services. This option to acquire future products or services can give rise to material rights, which impacts the amount of revenue recognized. This post provides an overview of the accounting for materials rights under ASC 606.
We have all been there, and for me, it happened just last week. After an incident at my house where a ball mysteriously hit the television, I made a trip over to the electronics store. As I’m getting ready pay, the clerk asks, “Would you like to purchase the 3-year extended warranty?” Questions quickly flew through my head… How risky am I feeling today? What warranty automatically comes with the TV? What are the chances my kids will break another TV within 3 years? Then the accounting nerd in me took over. How should I account for the additional warranty purchase under ASC 606? So, I wrote a post on it!
Unanswered Questions in ASC 606: Shipping and Handling (July 3, 2018)
As you probably know by now, ASC 606, Revenue from Contracts with Customers, is quite extensive and provides considerable guidance. While extensive, it can’t possibly cover all of the related issues that might arise in practice. In this blog, we’ll explore one of those unanswered questions, related to shipping and handling activities.
Unanswered Questions in ASC 606: Pre-Production Arrangements (July 10, 2018)
While ASC 606 is extensive, it can’t possibly cover all of the issues related to revenue recognition that might arise in practice. In a previous post we covered one of these issues related to shipping and handling activities. This week, I thought I’d explore another unanswered question on the topic of pre-production arrangements.
Online Learning Solutions
We've published the following online training modules related to ASC 606 that are available for immediate viewing:
- Revenue: Overview of ASC Topic 606 - This course provides an overview of the 5-step model within ASC 606 and the impact of the revenue recognition standard on various industries.
- Revenue: The Five-Step Model - The course explores each step within the new 5-step model in more detail.
- Revenue: Specific Issues - There’s more to revenue recognition under U.S. GAAP than the 5-step model. This course covers application issues associated with ASC 606.
Or purchase all 3 as a bundle for HUGE savings!
Big 4 Resources
All of the Big Four firms have issued detailed guides for the new revenue recognition standards. You can find the links below.
- Deloitte's A Roadmap in Applying the New Revenue Recognition Standard (2017)
- EY's Financial Reporting Developments: Revenue from Contracts with Customers (August 2017)
- KPMG's Handbook: Revenue Recognition (December 2017)
- PwC's Revenue from Contracts with Customers; Global Edition (August 2017)
How are private companies doing with implementing the new revenue standards? Turns out, they're a little behind! A recent survey by Deloitte notes that just 25% of private companies are currently on track to hit the effective date.
The AICPA has a dedicated website related ASC Topic 606 Revenue from Contracts with Customers. Among other items, it includes guidance published by various industry task forces.
The AICPA convened 16 different task forces to research the implications of the new revenue recognition standard (ASC 606) to a variety of industries. Even though this guidance is non-authoritative, it is helpful to discern those transactional and organizational areas where the new standard might have the greatest impact.
We hope this post helps you on your journey to implementing the new revenue standards. As always, we're here to help!