As industries, businesses and organizations have evolved, the Financial Accounting Standards Board has recognized the need to remove inconsistencies and weaknesses in existing revenue requirements and provide a more robust framework for addressing revenue issues. The new revenue pronouncement (ASC 606) represents the most significant change in accounting literature in decades and will completely transform how revenue is recognized, affecting nearly all companies. GBQ can help you be out in front of the changes that will affect your financial statements.

Key Implementation Considerations:

  • Contracts – can be written, oral or implied by customary business practices and multiple contracts can be combined if certain
    criteria are met
  • Performance Obligations – companies will need to establish processes to identify and monitor those activities that provide standalone “benefit” to customers
  • Transaction Price – variable consideration will need to be estimated at inception and impacts the accounting for discounts, rebates, refunds, credits, concessions, incentives, performance bonuses, penalties and contingent payments, among other topics
  • Allocation – companies will be required to estimate hypothetical “stand-alone” selling prices for bundled arrangements with multiple performance obligations, which may involve significant judgment
  • Disclosure – expanded to include information regarding disaggregation of revenue, contract assets and liabilities, performance obligations, transaction price (including allocation), and cost capitalization among others
  • The new standard also impacts the accounting for contract costs, gross vs. net revenue reporting, warranties, licensing, rights of return and consignment arrangements, among other topics