New global revenue recognition standard issued May 28, 2014 Share Subscribe RFP Published in the May 27 edition of On the Horizon. On May 28, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The IASB issued IFRS 15 with the same title. The standard represents the culmination of the Boards’ efforts to improve revenue recognition guidance. ASU 2014-09 creates a new, principle-based revenue recognition framework that will affect nearly every revenue-generating entity. ASU 2014-09 also creates a new topic in the Codification, Topic 606. In addition to superseding and replacing nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance, ASC 606 does the following: Establishes a new control-based revenue recognition model Changes the basis for deciding when revenue is recognized over time or at a point in time Provides new and more detailed guidance on specific aspects of revenue recognition Expands and improves disclosures about revenue ASC 606 is effective for public business entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Nonpublic entities are required to apply the guidance for annual periods beginning after December 15, 2017 and for interim and annual reporting periods thereafter. Early application is not permitted for public business entities. Nonpublic entities may apply the guidance using the same adoption dates required for public companies, among other early adoption alternatives. Entities are permitted to apply the new revenue standard either retrospectively, subject to some practical expedients, or through an alternative transition method. The alternative transition method requires an entity to apply the proposed guidance only to contracts not completed under existing U.S. GAAP at the date of initial application and to recognize the cumulative effect of adoption as an adjustment to the opening balance of retained earnings in the year of initial application. An entity that chooses to apply the alternative transition method will not restate comparative years; however, it is required to provide additional disclosures in the initial year of adoption. Although the new guidance is not effective for more than two years and while not every entity will experience a significant change in the top line revenue amount, all entities will need to apply ASC 606 once effective. Accordingly, all entities should begin their impact assessment now to enable them to determine what changes to systems, processes, and policies are needed to implement ASC 606 and how to communicate the impact of this new guidance to stakeholders. For more information on ASU 2014-09, refer to the FASB In Focus, “Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606).” In addition, on June 5, the FASB and the IASB will host a one-hour webcast, IN FOCUS: Revenue from Contracts with Customers, to provide a high-level overview of the new standard. The FASB has provided a link to the webcast host site and advance registration is required.