Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (topic 606 or ASC 606)

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Rödl & Partner Accounting Matters Vol 2018 – 1, published in August 2018

 

You may need to address and account for this potentially significant standard in the current year, but definitely so in 2019


Non-public entities are required to apply the new guidance under Topic 606 in annual periods beginning after December 15, 2018 (therefore, for the year ended December 31, 2019 for entities with a calendar year-end), and in interim periods beginning after December 15, 2019.


While not every entity will experience a significant change in the top line revenue amount, it is likely that Topic 606 once effective will impact every entity, to some degree. Accordingly, implementation efforts should begin as soon as possible to identify needed changes to systems, processes, and policies.


Transition measures

Topic 606 provides two alternative transition methods that an entity may elect to apply the new guidance.
  1. A full retrospective approach that provides an entity with certain optional practical expedients and requires restatement of all periods reported on; or
  2. A modified retrospective approach under which the cumulative effect of adopting the standard is recognized at the date of initial application, therefore January 1, 2019 for entities with a calendar year-end.

In determining which transition method to elect, an entity is urged to consider not only which method is easier to apply but also what the expectations are of the investor community and the users of its financial statements and reports.


If you have any questions and or require assistance with the implementation of this new accounting standard related to revenue recognition, please contact your Rödl & Partner office.

 

 

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