There are some keys changes that will be implement in the very near future for Revenue Recognition. These new pronouncements will change how we recognize revenue. The main reason for the changes to the standards is because revenue recognition guidance differs in Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)—and many believe both standards are in need of improvement.
Below is a summarized version of the changes that are forthcoming.
ASU 2014-09 Revenue from Contracts with Customers (Issued May 28, 2014)
Applies to all contracts with customers except:
- Insurance contracts
- Financial instruments
- Nonmonetary exchanges between entities in same line of business to facilitate sales to customers
Effective Date – Public Entities:
- Annual reporting periods beginning after December 15, 2017 (delayed effective date)
- Early adoption allowed for years beginning after December 15, 2016 (original effective date)
Effective Date – Non-Public Entities:
- Annual reporting periods beginning after December 15, 2018 (delayed effective date)
- Early adoption allowed for years beginning after December 15, 2016 (original early adoption date)
Core Principal of the New Standard:
“An entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”
Companies should start putting policies and procedures in place to implement the new standards.
We hope this blog provided useful and valuable insight on the new revenue recognition standards. For more information and insight email us at [email protected] or contact us at (301) 974-4568.