Reminder: FASB Defers Revenue Recognition Standard
In response to feedback from stakeholders, preparers, practitioners, and users of financial statements, in August 2015, the FASB approved a one-year deferral of the effective date of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.
The effective date of Update 2014-09 has been deferred for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
While the ASU has been deferred a year, AAFCPAs advises that clients spend the time now to understand the new standard and how it will impact their present revenue recognition policies. A thorough analysis is needed as there may be instances where contract provisions that have been used for many years may have to be changed in order to accommodate the new revenue recognition criteria contained in the ASU. While AAFCPAs thinks the deferral is good news for our clients, it is clear that this revenue standard is here to stay.
Private commercial companies and nonprofits need to embrace the new standard and determine how it’s going to impact their business model. Depending on the industry that you’re in, and the fact pattern specific to your company, AAFCPAs reminds you that the new revenue recognition standard could mean an acceleration of income, or a deferral of income. It may not necessarily have a neutral impact on your present revenue recognition policies.
If you have any question about how the ASU 2014-09: Revenue from Contracts with Customers will impact you directly, please contact your AAFCPA partner, or Jeffrey Mead, CPA, CGMA at 774.512.4131, email@example.com.