Revenue Recognition Implementation
Kathleen Baldwin, CPA, CCIFP
“CICPAC members wanted to compile a document focused on the aspects of the new standard that were most pressing to the construction industry.”
It is hard to believe the industry has been grappling with the proposed Revenue Recognition changes for over nine years. And yet, here we are. In that period, we have seen extensive rewrites from the initial proposed guidance to where we are today. Following an outcry from the credit community, construction contractors and, of course, the construction CPAs, we were able to influence the incoming model to a point of comparability between the periods before and after adoption. In other words, percentage of completion (or something similar to it) is still here.
After close to three years of brainstorming, discussions and debate, research, collaboration, drafting and reviewing, this publication is here for your use. It has been edited by the best in the industry, it is your “go to guide” for construction CPAs. This guide tackles the issues that are most pressing to construction companies, as they drive through 2018 and begin to understand the implications of the new standards.
Below is a highlight, quick-scan overview of the issues and submit the form below to download the full PDF.
Overview of New Revenue Recognition Standard: ASC 606
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification® (ASC) Topic 606, Revenue from Contracts with Customers. Topic 606 changes how most organizations are required to recognize revenue under US generally accepted accounting principles (GAAP)—specifically contracts with customers. This new standard will be effective January 1, 2019 for non-public companies.
New Concepts – You may find yourself asking: What’s a performance obligation? What’s variable consideration? How do I record waste? How do we account for warranties? What do I do with uninstalled materials and procurement costs?
CICPAC member firms can answer all those questions for you. We are a dedicated thought leader in this arena, working with our affiliates in the construction industry, and have co-authored a 50-plus page implementation guide on this new standard (available upon request – be sure this links to the contact form).
The new standard has been commonly broken down into a 5-step process.
Step 1 – Identifying the Contract with the Customer
Step 2 – Identifying the Performance Obligation in the Contract
Step 3 – Determining the Transaction Price
Step 4 – Allocating the Transaction Price to Performance Obligations in the Contract
Step 5 – Recognizing Revenue When (or as) the Entity Satisfies Each Performance Obligation
The 2019 deadline is steadily approaching – contact the CICPAC member in your marketplace to help your company identify and implement necessary changes.