Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

Appendix E The New Revenue Recognition Standard: FASB ASC 606

This appendix is nonauthoritative and is included for informational purposes only.

Overview

On May 28, 2014, the International Accounting Standards Board (IASB) and FASB issued a joint accounting standard on revenue recognition to address a number of concerns regarding the complexity and lack of consistency surrounding the accounting for revenue transactions. Consistent with each board’s policy, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the IASB issued International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers. FASB ASU No. 2014-09 will amend the FASB Accounting Standards Codification^® (ASC) by creating a new Topic 606, Revenue from Contracts with Customers, and a new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. The guidance in ASU No. 2014-09 provides what FASB describes as a framework for revenue recognition and supersedes or amends several of the revenue recognition requirements in FASB ASC 605, Revenue Recognition, as well as guidance within the 900 series of industry-specific topics.

As part of the boards’ efforts to converge U.S. generally accepted accounting principles (GAAP) and IFRSs, the standard eliminates the transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach for revenue recognition. The intent ...