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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