By Keiter CPAs
In 2014, the FASB issued their much anticipated and finalized standard on Revenue from Contracts with Customers, which was incorporated into the existing codification under ASC 606.
Due to the complexities and far-reaching nature of this accounting change, the FASB has provided an extended length of time between issuance and implementation. Private companies were required to adopt the standard for years beginning after December 15, 2018. The standard applies to all contracts with customers with the exception of:
- Lease contracts
- Insurance contracts
- Certain financial instruments
- Guarantees other than product or service warranties, which are within the scope of ASC 606
- Certain nonmonetary exchanges
What are the Revenue Recognition Changes?
Due to the wide range of applicability of the standard, most entities are affected. The reporting impacts for entities will vary by industry, as well as the number and types (custom or standard) of contracts.
Even if the reporting for the entity is not deemed significant, the companies must still go through the process to review their contracts, assess any changes, and quantify the assessments. Since most entities are affected, the reporting impacts will vary by industry as well as the number and types of contracts. Revenue recognition impacts include, but are not limited to, the following industries and business operations:
- Real Estate
- Construction
- Private Social Clubs
- Manufacturing, Distribution & Retail
- Contract Enforceability Provisions
- Accounting for Franchisor Revenues
Companies must act now to begin the process of reviewing their contracts and assessing the areas in which financial reporting and disclosures will be impacted.
Questions on how the revenue recognition standard applies to your company? Keiter can help you understand, evaluate, and prepare to implement the many aspects of revenue recognition criteria to your business. Contact your Keiter representatives or Email | Call 804.747.0000
About the Author
Keiter CPAs
Keiter CPAs is a certified public accounting firm serving the audit, tax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial services, construction, real estate, manufacturing, retail & distribution industries and nonprofits. We also provide business valuations and forensic accounting services, family office services, and inbound international services.
More Insights from Keiter CPAsThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
