Recognizing Revenue from Contracts with Customers
Recognizing Revenue from contracts with customers (Topic 606) is effective for nonpublic entities for the calendar year ending December 31, 2019 (or fiscal years ending 2020).
Recognizing Revenue from contracts with customers (Topic 606) affects substantially all entities, as well as creditors, investors, potential buyers, and others that use their financial statements. Industries that are likely to experience the most changes include telecommunications, aerospace, construction, asset management, real estate, and software. (Nonprofits will have to consider the effects of Revenue Recognition on their current funding streams. Areas which may have the greatest changes are federal or state grants, membership revenue, tuition revenue, and their party revenue.)
The standard requires a retrospective application, and allows for transition under two methods: either full retrospective adoption, or modified retrospective adoption with certain practical expedients available. Depending on the method chosen, companies will need to either (1) evaluate and restate 2018 revenue transactions under Topic 606 or (2) disclose the amount of revenue that would have been recorded for the year ended 2019 (fiscal) under the current revenue guidance (topic 605) in the December 2019 (Fiscal 2020) financial statements.
AAFCPAs can advise you on the impact of the new standards, and provide guidance throughout the transition process.
Understanding and implementing accounting standards can be complex, time-consuming, and often require requisite skills and expertise not found on your internal finance team. AAFCPAs provides financial management assistance on this complex technical accounting issue, allowing clients to confidently apply the standard with greater efficiency and ease.
AAFCPAs ASU Implementation Services Include:
- Assessment of the impact of the new standard on your business, and development of an implementation schedule to appropriately allocate your resources and achieve compliance.
- Guidance in reviewing and updating your accounting policies and procedures to reflect required changes.
- Review of your customer contracts, prepare contract abstracts, and document accounting conclusions under the new five step model.
- For nonprofits, assistance with evaluating federal or state contracts to determine if they are within the scope of Topic 606
- Analysis of contract portfolio considerations.
- Evaluating performance obligations included in customer contracts.
- For nonprofits, evaluating performance obligations in certain long-term performance-based contracts
- For nonprofits, identification of costs performance obligations associated with membership revenue
- Assistance with the development of certain judgments and estimates required to account for revenue, such as variable consideration and other concessions or promotions.
- Assistance in evaluation of principal versus agent considerations.
- Assistance with the evaluation of accounting for warranties.
- Assistance with assessing the impact of certain available practical expedients.
- Evaluating the accounting for certain contract costs and the available accounting elections.
- Assistance in determining adoption strategy and available practical expedients.
- Business Process Performance Analysis, and Information Systems Gap Analysis to ensure efficiencies in capturing and processing information, and producing financial reporting in line with the new reporting standard.
- Assistance with drafting financial statement footnotes disclosures.
Consistent delivery of the highest levels of quality assurance, tax and other professional services demands discipline and a commitment to continuous learning. AAFCPAs consulting professionals combine technical competence with a high level of service to continue to anticipate the ongoing and evolving needs of our clients.
At the end of the day, it is our expertise that clients value the most. We understand the nuances of the new guidance because we consult on it with our clients regularly, and encourage them to take action now on this important issue.
Contact AAFCPAs through the form on the right side of the page or at email@example.com and we will call you back within 24 hours. If you'd like to call in today, please contact us at 508.366.9100.