Implementing new tech industry guidance in ASC 606

Entities in the technology industry are among those experiencing the most significant impact of adopting the new revenue guidance in ASC 606, Revenue from Contracts with Customers. Due to the unique and complex arrangements that exist in this industry, particularly in software and software as a service arrangements, industry-specific guidance had developed over the years.

Grant Thornton’s guide, Implementing the new revenue guidance in the technology industry, highlights changes in the new guidance from legacy GAAP, as well as specific implementation issues that technology entities face in applying the new guidance.

ASC 606 supersedes all industry-specific guidance, including ASC 985-605, Software: Revenue Recognition, replacing specific rules with a single, principle-based model for recognizing revenue. The core principle requires an entity to recognize revenue in a manner that depicts the transfer of products and/or services to a customer in an amount that reflects the consideration the entity expects to be entitled to in exchange for those products and/or services.

For a comprehensive discussion of the full standard, read our guide, Revenue from contracts with customers: Navigating the guidance in ASC 606 and ASC 340-40.