This week’s edition covers a notable articles and accounting standard updates regarding ASC 606.
To quickly identify key areas, open each link and search for “606” or “2014-09” in the text.
News and Accounting Standard Updates
- Accounting Today, Companies choosing riskier path for revenue recognition, by Michael Cohn
Our thoughts: This is a solid article using metrics from ASC 606 early adopters and year 1 adopters to identify which adoption method was most frequently used by public companies. Within the article is a link to access a report titled “Impact of New Revenue Recognition Standards on Public Companies” by the firm Intelligize. The combination of the article and its link to the metrics-driven report from Intelligize offers perspectives as to why companies’ adoption approaches introduced risk. Additionally, the Intelligize report provides examples of SEC Comments put forward to ASC 606 early adopters.
- Journal of Accountancy, FASB clarifies collaborative arrangement accounting rules, by Ken Tysiac
- FASB, Accounting Standards Update No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606
Our thoughts: In combination, these provide guidance on how companies determine whether certain transactions between participants in 'collaborative arrangements' should be accounted for within the board’s revenue recognition standard (ASC 606).
As the article and ASU both indicate, the amendments in the new standard take effect for public companies for fiscal years beginning after Dec. 15, 2019, and interim periods within those fiscal years. For all other organizations, the amendments take effect for fiscal years beginning after Dec. 15, 2020, and interim periods within fiscal years beginning after Dec. 15, 2021. Early adoption is permitted.
- FASB Staff Paper, Update on Implementation Activities for Franchise Industry
Our thoughts: This FASB Staff Paper offers guidance to private entities that are franchisors. Examples are provided within the staff paper for companies to use as 1.) blueprints for their ASC 606 adoptions or 2.) in the case of companies that have already adopted, and it provides a benchmark to compare its ASC 606 implementation activities against. Even if your company is not a franchisor, reviewing this Staff Paper could hold value as it offers an example of the type of practical input FASB can provide if prompted. This could be useful for companies in different industries that are struggling with guidance and have found no such examples exist, as they can petition FASB to do so by citing this Staff Paper.
- Journal of Accountancy, It’s crunch time for private companies on revenue recognition, by Ken Tysiac
Our thoughts: This is a quick read that explains what the upcoming ASC 606 adoption date means for private companies. Specifically, it details the challenges private companies are facing to adopt and offers a high-level list of action items that private companies can take to expedite ASC 606 adoptions.
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