The FASB and IASB recently released converged revenue recognition standards related to customer contracts (ASU 2014-09 and IFRS 15, respectively) which are the culmination of a joint project. ASU 2014-09 takes effect in 2017 and establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. BDO has established this resource center specific to U.S. GAAP to provide you with timely information for transitioning to the new standard and applying it to your organization. The new ASU is available here
and has been codified in ASC Topic 606. BDO is pleased to provide a practical summary of Topic 606
, which includes examples, frequently asked questions, and BDO’s commentary and insight regarding application of the new standard.
The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. Entities will generally be required to make more estimates and use more judgment than under current guidance, which will be highlighted for users through increased disclosure requirements.
Companies will be expected to apply a five step model for recognizing revenue:
The standard is broadly applicable and requires companies to consider how and when they will be applying the requirements to their organizations. For a brief summary of scope, effective dates and transition methods, see our Executive Summary
Transition and Interpretations:
The FASB and the IASB have established a joint transition resource group (TRG) that is designed to inform the Boards about interpretive issues that are likely to arise as implementation efforts commence. BDO is represented by BDO International's Andrew Buchanan
, the Global Head of IFRS. Interested parties are encouraged to monitor the resource group’s deliberations. Learn more here
The AICPA has developed multiple industry-based task forces that have already begun initial discussions about the new standard’s impact with a view to providing white papers before and after the standard’s effective date. The white papers will not be authoritative U.S. GAAP, but rather are designed to provide emerging best practices. The task forces consist primarily of industry professionals and auditors, including BDO professionals.
Refer to BDO's News & Resources
for further ASU 2014-09 guidance and insight currently available and in development.