Audit and Accounting Guide

Chapter 1 General Accounting Considerations

Notice to Readers

This chapter provides an overview of FASB Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. Readers are encouraged to refer to FASB ASC 606 for the full text, implementation guidance, and illustrations. Refer to subsequent chapters of this guide for accounting guidance on industry-specific implementation issues across a variety of industries.

This chapter also presents an accounting implementation issue developed to assist management in applying FASB ASC 606 and related interpretations from the FASB/IASB Joint Transition Resource Group for Revenue Recognition (TRG) to third party extended service warranty contracts within the scope of FASB ASC 606.

The AICPA Insurance Entities Revenue Recognition Task Force identified and developed this accounting implementation issue, and the AICPA Revenue Recognition Working Group and AICPA Financial Reporting Executive Committee (FinREC) approved it. They are a source of nonauthoritative accounting guidance for nongovernmental entities.

Lastly, https://www.fasb.org has information on activities from the TRG, including summaries of issues discussed.

Introduction

1.01 In May 2014, FASB and IASB issued a joint accounting standard on revenue recognition to address a number of concerns surrounding the inconsistencies and complexities in accounting for revenue transactions. FASB issued the update in the form of FASB Accounting Standards Update (ASU) ...