The new global revenue standard is here!

Stephen Murray Stephen Murray

After dedicating many years to its development, the FASB and the IASB have issued their converged standard on revenue recognition.

Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, and IFRS 15 with the same title create a new, principle-based revenue recognition framework that will affect nearly every revenue-generating entity. ASU 2014-09 creates a new topic in the FASB Accounting Standards Codification® (ASC or Codification), Topic 606. In addition to superseding and replacing nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance, ASC 606:

  • 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 topics; and
  • expands and improves disclosures about revenue.

In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic.

The guidance in ASU 2014-09 is effective for public 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 entities. A nonpublic entity may apply the guidance as early as annual reporting periods, and interim periods within those years, beginning after December 15, 2016.

This bulletin explains the key features of ASC 606 and provides practical insights into its application and impact.