What Implications Could
FASB's ASC 606 Have for Healthcare?
The new revenue recognition accounting standard, ASC Topic 606 Revenue from Contracts with Customers
, takes effect for public entities in 2018, with all other companies following suit in 2019. The goal of ASC 606 is to scrap industry-specific accounting to give investors a more streamlined picture of revenues–one that’s comparable across global jurisdictions.
ASC 606 will require companies to determine revenue recognition based on five steps:
- identifying the contract;
- identifying separate performance obligations;
- determining the transaction price;
- allocating the transaction price to separate performance obligations; and
- recognizing revenue when the entity fulfills performance obligations.
However, the third step of ASC 606–determining the transaction price–could prove uniquely challenging in healthcare, complicated by the transition to value-based care and the diverse nature of constituents-including hospitals, accountable care networks and post-acute care providers.
Our own Steven Shill addresses this and other variables in McKnight’s
, offering actions healthcare organizations should consider when preparing their compliance plans. Read more here: http://bit.ly/2jkphT3
. For timely information on transitioning to ASC 606 and applying it to your organization, visit BDO’s Revenue Recognition Resource Center here
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