Skip to content
  • About
    • About Us
    • Our Team
    • History
    • Affiliations
    • TBC News
  • Services
  • Industries
  • Resources
    • Taxes QuickGuide
    • Record Retention Guide for Businesses
    • Record Retention Guide for Individuals
    • Federal Refund Status
    • NYS Refund Status
    • SafeSend Returns
    • ShareFile Portal
  • TBC News
    • TBC News
    • Press
  • Careers
    • Current Openings
    • Why TBC?
  • Contact Us
    • Contact Us
    • Submit Your RFP
    • Directions
  • Search
(518) 456.6663
Teal, Becker & Chiaramonte Certified Public Accountants - Celebrating 50 Years of Service
Search
Make a Payment Client Login
  • About
    • About Us
    • Our Team
    • History
    • Affiliations
    • TBC News
  • Services
  • Industries
  • Resources
    • Taxes QuickGuide
    • Record Retention Guide for Businesses
    • Record Retention Guide for Individuals
    • Federal Refund Status
    • NYS Refund Status
    • SafeSend Returns
    • ShareFile Portal
  • TBC News
    • TBC News
    • Press
  • Careers
    • Current Openings
    • Why TBC?
  • Contact Us
    • Contact Us
    • Submit Your RFP
    • Directions
  • Search
  • Call
  • Payment
  • Map
  • Login

Revenue Recognition

In May of 2014, the Financial Accounting Standards Board (“FASB”) issued its final standard on Revenue from Contracts with Customers known as Accounting Standards Codification (“ASC”) 606.  Since the new standard was first introduced, the FASB has issued several Accounting Standard Updates to either amend or clarify the new guidance.  The revenue standard has far-reaching implications for all industries as it eliminates industry-specific revenue recognition guidance under its predecessor standard, ASC 605.

The underlying principle of the new standard is that an entity should recognize revenue to depict the transfer of 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.  In order to recognize revenue ASC 606 introduces a 5 step model;

  1. Identify the contract(s) with a customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price
  4. Allocate the transaction price to the performance obligations in the contract
  5. Recognize revenue when (or as) the entity satisfies a performance obligation

For private companies, the new standard is effective January 1, 2019, and the impact of adoption, as well as the new disclosures required, will need to be reflected in an entity’s financial statements for reporting periods after January 1, 2019.

In order to understand and quantify the implications of adopting the new standard an entity should consider the following questions;

  1. How do we get paid?  Is it at A Point in Time, for example, once a project is fully complete and transferred to the end customer, or do we get paid Over a Period of Time?
  2. Who controls the asset that is ultimately being delivered as it is being constructed?
  3. Is there a gap between when a bill for services, an asset, or a product is delivered to the customer and when the customer is required to pay for what was rendered?
  4. What is your process for recognizing revenue on change orders, discounts, rebates, etc…?
  5. Do you have a process for tracking and quantifying wasted materials or wasted labor?
  6. Do you offer complimentary services for projects, such as design or engineering services which have traditionally been billed separately?

The answer to each of these questions will impact how revenue is recognized under the new standard.  The above questions should be among the questions considered by companies as they begin to take an inventory of the various types of contracts they enter into as a part of their regular operations.  Even if it is determined that the adoption of the new standard will not materially impact an entity’s financial statements, the entity is not absolved from the enhanced disclosures required by the new standard.

See the Newsletter HERE.

Recent Issues

  • Revenue Recognition
  • Accounting Matters For May 2016
  • Accounting Matters for March 2016
  • Accounting Matters for December 2015
  • Accounting Matters for November 2015

More Newsletters

  • Health Care Reform Monthly
  • For Your Benefit
  • Real Estate Advisor
  • Accounting Matters
  • Management and Tax Concepts
  • More Than Money
  • Your Healthy Practice

TBC News

  • Solar Savings: How Being Environmentally Friendly Pays
  • Tax Updates and Planning for Individuals
  • Tax Updates and Planning for Businesses
  • 2022 Tax Year Changes That Could Impact Your Manufacturing Company
  • Additional Best Practices for Establishing a 401(k) Plan
View All

Have a Question?

"*" indicates required fields

This field is for validation purposes and should be left unchanged.
TBC

Teal, Becker & Chiaramonte Certified Public Accountants
7 Washington Square, Albany, NY 12205

Phone (518) 456-6663 | Fax (518) 456-3975

Subscribe to our Monthly Newsletters

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

© Teal, Becker & Chiaramonte All Rights Reserved

  • Terms of Use
  • Contact Us
  • Emergency

CPA Website Development by Mannix Marketing, Inc.

Having trouble using this site? Accessibility is our goal, please contact us with site improvements. View Sitemap

Top