Complying with the Revenue Recognition Standards

Author: Lynn Fountain

Topic 606 (ASC 606) revenue recognition standard, outlines five steps for proper compliance. At the surface, these steps seem simplistic. However, there are many considerations that should be considered within each step based on your process and industry.

On May 28, 2014, the Financial Accounting Standards Board (FASB) completed its Revenue Recognition project. It issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance establishes principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. The standard affects all entities (public, private, and not-for-profit) that have contracts with customers. Exclusions include:
• Leases accounted for under FASB Accounting Standards Codification (ASC) 840, Leases;
• Insurance contracts accounted for under FASB ASC 944, Financial Services—Insurance;
• Most financial instruments and guarantees (other than product or service warranties).

Transaction and industry specific revenue recognition guidance is eliminated. It is replaced with a principle-based approach for determining revenue recognition. The new standard requires significantly more disclosure than previous generally accepted accounting principles (GAAP)

Publication Date: December 2019

Designed For
Accountants and Finance professionals, Auditors, Executive management/ Board members and Audit Committee members, and Legal and Compliance professionals.

Topics Covered

• Revenue recognition standard effective dates
• Core principles
• The five-step revenue recognition model
• Standard on various revenue concepts and industries

Learning Objectives

• Identify the effective dates for the new revenue recognition standard
• Identify the need for the new revenue recognition standard
• Recognize and apply the new revenue recognition core principles and the five-step revenue model
• Identify the impact of the new revenue recognition standard on various revenue concepts
• Describe the impact of the revenue recognition standard on various industries
• Identify the core principle of the new revenue recognition standard
• Identify a type of output method as it relates to performance obligations
• Identify acceptable methods for measuring progress

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Accounting (2 hours)

Program Prerequisites
None

Advance Preparation
None