ASU 2014-09 REVENUE FROM CONTRACTS WITH CUSTOMERS (TOPIC 606)
On May 28, 2014, the FASB completed its Revenue Recognition project by issuing Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. The new guidance establishes the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers.
To that end, the new guidance:
Removes inconsistencies and weaknesses in existing revenue requirements
Provides a more robust framework for addressing revenue issues
Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets
Provides more useful information to users of financial statements through improved disclosure requirements
Simplifies the preparation of financial statements by reducing the number of requirements to which an organization must refer.
The new guidance affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).
Public organizations: the new guidance on revenue recognition is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the original effective date of December 15, 2016 by one year. Early application is permitted as of the original effective date.A public organization is an organization that is any one of the following:
A public business organization
A not-for-profit organization that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market
An employee benefit plan that files or furnishes financial statements to the U.S. Securities and Exchange Commission.
For nonpublic companies and organizations (including not-for-profits): the new guidance will be required for annual reporting periods beginning after December 15, 2018, and interim and annual reporting periods after those reporting periods. Nonpublic companies and organizations may elect early application, but no earlier than the effective date for public entities.
The FASB issued additional Updates related to Topic 606, Revenue from Contracts with Customers, to address challenges identified by the TRG in implementing and applying the new revenue standard in certain areas.
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