Has your business transitioned to using the new Revenue Recognition standard that went into effect? This applies for annual reporting periods beginning after December 15, 2018 for nonpublic entities. That’s this past January for most entities.
New Standard Now in Effect
If you haven’t gone through this process, you won’t want to wait. ASC 606 Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (FASB), is a complex standard, with thousands of pages of interpretation.
Good News: Standard Translates Across Industries
Ultimately, businesses should see the benefit in converting reporting to the new standards as the intent behind the change is to create consistent revenue reporting across industries.
Potential Significant Effect on Financials, Processes
At its core, when control passes to the customer is now key in the new guidance. The transfer of control takes time to analyze, in accordance with specific methodologies, and a key question at stake is when control transfers between businesses for recognizing revenue.
We’re Prepared to Assist
Our team at Windham Brannon is prepared to analyze and advise your team in this arena as you consider how this will impact your organization’s processes.
Respect the Process with the New Revenue Recognition Standard Methodology
Five Steps to Determine Revenue Recognition
1. Identify the contract with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation
Warning: Don’t jump to Step 5 and conclude there is no impact for your company. Respect the process and work the steps in order.
If you need assistance assessing and applying the new reporting standard, contact Donna Caruso, CPA, at dcaruso@windhambrannon.com or Kerry Buchan at kbuchan@windhambrannon.com.
