With effective dates quickly approaching for private companies and already here for others, now is the time for private companies to prepare for implementation of the new revenue recognition standards. The application and implementation of the new revenue recognition standards can be complex and involve significant management judgment. In addition, the implementation of the new standards may require companies to change not only the way they recognize revenue, but also their overall processes and related controls.
In May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) jointly issued new revenue recognition accounting standards: Accounting Standards Update (ASU) 2014-09 (Topic 606), Revenue from Contracts with Customers in the U.S., and under International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers. Since the issuance of ASU 2014-09, the FASB has issued several accounting standard updates to ASC Topic 606, with more pending. The intent behind the global overhaul of the revenue standards is to increase comparability among industries and between GAAP and IFRS.
In the U.S., the standard is effective for private companies for fiscal years beginning after December 15, 2018 (January 1, 2019 for calendar year-end companies) and interim periods within fiscal years beginning after December 15, 2019 (January 1, 2020 for calendar year-end companies). For public business entities, certain not-for-profit entities, and certain employee benefit plans, the standard is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period (January 1, 2018 for calendar year-end companies).