Search
Certified Public Accountants
& Business Consultants
Revenue Recognition

Revenue Recognition Resource Center


In this series of articles on the new accounting guidance for revenue recognition, we will explore different aspects of the new standard. Please contact a member of your RubinBrown team for more information and ways that we may be able to help you.

New revenue recognition rules will be effective January 1, 2019, for private companies with a calendar year end. The new standard is a complete overhaul of the authoritative guidance, moving from a legacy of over 200 pieces of mostly industry specific guidance to one comprehensive framework for all entities. The only revenue contracts that are outside of the scope of this standard are leases, insurance and financial instruments.

The expected benefits of the new standard include:

  • Consistent application across all customer contracts
  • Increased comparability across entities and industries
  • More robust guidance for addressing complex, judgmental issues
  • More useful information for financial statement users, primarily through a significant increase in required disclosures

The core principle of the new standard is to recognize revenue from customers in a way that reflects the entity’s transfer of promised goods and services at an amount that represents the consideration that the entity expects to receive in exchange for those goods and services. The new revenue recognition model uses five steps to achieve this principle:

  1. Identify the contract with the customer.
  2. Identify the performance obligations within the contract.
  3. Determine the overall transaction price of the contract.
  4. Allocate the transaction price between the identified performance obligations.
  5. Recognize revenue as performance obligations are satisfied.

02/07/2018

Focus on Revenue Recognition: Getting Started


The implementation of the new standard is expected to be a significant undertaking for most entities. Even if you do not expect a significant change in the accounting for revenue, the comprehensive nature of the change will require companies to look at their revenue with a clean sheet of paper approach, assessing each of the five steps for all significant revenue streams.

02/21/2018

Focus on Revenue Recognition: Step 1


First, consider whether the contract is with a customer. A customer is defined as “a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.”

04/23/2018

Focus on Revenue Recognition: Step 2


Once you have identified an in-scope contract, you are ready to identify the performance obligations in the contract. Most contracts explicitly state the promised goods and/or services to be transferred to the customer.

04/24/2018

Focus on Revenue Recognition: Step 2  – Additional Considerations


In the previous article, we provided an overview of the key considerations in identifying performance obligations. Some of the components of this step require significant judgement and have posed some challenges during implementation. This article will highlight some of these areas.

04/24/2018

Focus on Revenue Recognition: Step 3


The new standard defines transaction price as “the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).