Common U.S. GAAP Issues Facing Accountants, 2nd Edition

Chapter 4Recognizing Revenue Under the New Standard: Core Principles and Resources

Learning objectives

• Identify the core principles of FASB ASU No. 2014-09.
• Identify effective date and transition requirements.
• Identify useful resources to assist you in the transition and implementation of FASB ASU No. 2014-09.

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 FASB ASU No. 2014-09, Revenue from Contracts with Customers (FASB ASC 606) and IASB issued International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers.

FASB ASU No. 2014-09 created topic, 606, Revenue from Contracts with Customers, and subtopic, 340-40, “Other Assets and Deferred Costs — Contracts with Customers.”’

FASB ASC 606 brought about the following:

• Provided a framework for revenue recognition
• Superseded or amended several existing revenue recognition requirements and industry-specific topics within FASB ASC 900

As part of the boards’ efforts to converge GAAP and IFRS, well known and frequently used industry-specific revenue recognition guidance was eliminated and replaced with a principles-based approach for revenue recognition. This was done to avoid inconsistencies of accounting treatment across different ...