Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Size: px
Start display at page:

Download "Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition"

Transcription

1 January 2, 2018 Financial Reporting Center Revenue Recognition Working Draft: Broker-Dealer Revenue Recognition Implementation Issue Issue #3-2: Selling and Distribution Fee Revenue Expected Overall Level of Impact to Industry Accounting: Minimal Wording to be Included in the Revenue Recognition Guide: Background: 1. Managed accounts or other pooled investment vehicles (collectively funds ) enter into agreements with distributors to distribute, i.e. sell, shares to investors. 1 There are different ways distributors may be compensated for the same service. Fees may be paid upfront, over time (e.g., 12b-1 fees) on the basis of a contractual rate applied to the monthly or quarterly market value of the fund (NAV), upon investor exit from the fund (i.e., a contingent deferred sales charge (CDSC)), or as a combination thereof Upfront, ongoing and CDSC fees are discussed below as distribution fees. 3. Distributors may incur costs such as commission charges for the performance of sales and/or distribution services by sales representatives (its employees) or third-party distributors on their behalf. Identify the contract with a customer (FASB ASC through 25-8) 4. Selling and/or distribution commissions and fees are generally stated in written agreements such as selling and/or distribution agreements. To determine whether the written agreement meets the definition of a contract with a customer within the scope of the revenue standard, an entity should consider the criteria in FASB ASC : a. The contract has been approved (in writing, orally, or in accordance with customary business practices) and the parties are committed to perform their respective obligations b. The broker-dealer can identify each party s rights c. The broker-dealer can identify the payment terms 1 Such funds can have varying strategies (e.g., investment grade bonds, emerging market, high-yield and distressed among others.) 2 For example, 12b-1 fees may be combined with CDSC fees that decline over time.

2 d. The contract has commercial substance e. Collection of the consideration is probable 5. FASB ASC 606 defines a customer 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. In this regard, a fund typically contracts with a distributor to, over a period of time, sell and/or distribute securities on its behalf (in exchange for specified commissions and fees), which is the distributor s ordinary business activity. Given this contractual relationship and consideration of the indicators in the section Determining the Customer in an Asset Management Arrangement in paragraphs of the Asset Management chapter of the AICPA Audit and Accounting Guide: Revenue Recognition, FinREC believes that the fund will generally be the distributor s customer for purposes of applying FASB ASC 606. For purposes of this issue, the fund is considered the customer under the selling and/or distribution contract with the distributor. However, entities should consider their own contracts and related facts and circumstances when identifying the customer. 6. Distribution contracts are typically terminable upon notice by either party without incurring a significant termination penalty. When the distributor gives or is given notice of termination, the contract ceases at the end of the notice period, typically days. In the event that the distributor is terminated by the fund, the distributor may still be entitled to ongoing fees so long as the investors it placed in the fund remain invested. These ongoing fees terminate only if/when the investor terminates the distributor as their broker of record. FASB ASC explains that when a contract has no fixed duration and can be terminated or modified by either party at any time, an entity should apply the guidance in FASB ASC 606 to the duration of the contract (that is, the contractual period) in which the parties to the contract have present enforceable rights and obligations. Identify separate performance obligations (FASB ASC through ) 7. Services promised in a selling and/or distribution contract generally include 1) the sale of fund interests, 2) marketing services and 3) other shareholder services. Marketing services may include development, formulation and implementation of marketing and promotional activities, preparation, printing and distribution of prospectuses and reports. In some cases, distribution contracts may also include ongoing shareholder services such as processing of shareholder transactions and the maintenance of shareholder records. Depending on the promises within a selling and/or distribution contract, the distributor may identify a single performance obligation or multiple performance obligations. 8. Each distributor should consider the specific terms of a given selling and/or distribution contract and identify performance obligations as defined in FASB ASC In order to evaluate the performance obligations included in a selling and/or distribution contract, the distributor should identify the goods or services promised to the customer and evaluate the nature of these promises to the customer. In making this assessment, consideration may need to be given to the guidance on combination of contracts in FASB ASC when the different types of services are contracted separately but at or near the same time with the customer. 9. As discussed in FASB ASC , a performance obligation is a promise to transfer to the customer either: a. A good or service (or a bundle of services) that is distinct, or b. A series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. 10. Each of the services included in a contract should be analyzed under paragraphs of FASB ASC to determine whether it is a distinct service that represents a performance obligation that should be accounted for separately. 11. The nature of the distributor s overall promise in the contract is to provide marketing services in conjunction with the sales of shares. In order to sell shares to investors, the distributor may develop and formulate marketing materials related to the fund offering. Generally, the marketing and selling of the shares are performed by the same distributor where the distributor is paid only upon a sales of shares with no separate fee for marketing. 12. As the success of selling shares is highly dependent upon the marketing efforts, sales and marketing are highly interrelated and interdependent on one another as the purpose of marketing is to solely sell shares. The distributor integrates marketing and selling services to provide the combined output of selling the shares for which the customer has contracted. In other words, the entity is using the services as inputs to deliver the combined output specified by the customer. Therefore, FinREC believes both sales and marketing generally would not be considered separately

3 identifiable based on FASB ASC (b) and (c). However, individual facts and circumstances of specific agreements and arrangement should be carefully evaluated. 13. As noted in paragraph 7, a distribution agreement generally includes 1) the sale of fund interests, 2) marketing services and 3) other shareholder services. As noted in paragraph 12 above, FinREC believes that generally the sale and marketing services are combined to make one performance obligation. Judgment and additional analysis is required when determining whether shareholder services meet the definition of a performance obligation that is separately identifiable under FASB ASC See paragraphs 23 and 27 below. Determine the transaction price (FASB ASC through ) 14. A distributor s compensation for selling and/or distribution services is established by the contract between the distributor and the fund and is normally included in the prospectus written by the fund. Contracts may be structured with distribution fees that become determinative (i.e., uncertainty resolved) at different times, including upfront, over time, upon an investor s redemption, or a combination thereof. 15. Upfront distribution fees are generally a fixed percentage of the share price. In this manner the transaction price for upfront fees is fixed at the date the shares are sold to the investor. 16. A distributor s compensation from ongoing distribution fees received is generally variable. The fee is generally calculated as a fixed percentage of the then current value of the shares and received on an ongoing periodic basis so long as the investor remains invested in the fund. 3 The total amount of compensation is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund. 17. A distributor s compensation from CDSCs is generally variable. CDSCs may be paid upon an investor s exit from the fund. The amount of compensation generally varies based on the length of time the investor remained in the fund as well the value of the shares at the time of redemption. 18. FASB ASC requires that an entity include variable consideration in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 19. FASB ASC provides factors to consider when assessing whether variable consideration should be constrained based on the likelihood and the magnitude of a revenue reversal. Factors that could increase the likelihood or the magnitude of a revenue reversal include, but are not limited to, any of the following: a. The amount of consideration is highly susceptible to factors outside the entity s influence. Those factors may include volatility in a market, and the judgment or actions of third parties. b. The uncertainty about the amount of consideration is not expected to be resolved for a long time. c. The entity s experience (or other evidence) with similar types of contracts is limited, or that experience (or other evidence) has limited predictive value. d. The entity has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances. e. The contract has a large number and a broad range of possible consideration amounts. 20. Distributors should evaluate whether the estimated variable consideration should be constrained (i.e., excluded from the transaction price and hence from revenue recognition) in accordance with the factors noted above. 21. FinREC believes if contracts with customers are characterized by the following factors, then it is likely that a distributor s circumstances would result in a constraint of the variable consideration, as variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved: 3 Generally, the distributor must also remain the broker of record in order to be entitled to the fee.

4 a. Variable consideration in selling and/or distribution contracts is highly susceptible to factors outside the distributor s control such as the market value of the fund s shares at future points in time and the length of time the investor will remain invested in the fund. b. There is uncertainty as to the amount of ongoing distribution fees and CDSCs and this uncertainty is not expected to be resolved for a long time. However, a portion of the fees will become fixed and no longer constrained when the uncertainty is resolved at subsequent dates. c. Despite a distributor s historical experience with similar contracts, that experience generally would be of little predictive value in determining the future market value of investor shares or the period of time an investor will hold investments. d. The ongoing distribution fees and CDSCs generally have a large number of and a broad range of possible amounts. Allocate the Transaction Price to Performance Obligations (FASB ASC through ) 22. Generally, the nature of the distributor s overall promise in the contract is to sell the security and provide marketing services which generally form a single performance obligation as noted in paragraph 13. As noted in paragraph 12, judgment and additional analysis is required when assessing whether shareholder services are distinct in terms of the contract and therefore meet the definition of a performance obligation. 23. If shareholder services do not meet the definition of a performance obligation that is distinct in terms of the contract, FinREC believes the distribution arrangement will generally only have one performance obligation that generally includes sales, marketing and shareholder services. If shareholder services meet the definition of a performance obligation that is distinct, FinREC believes the distribution arrangement generally includes two performance obligations: sales and marketing combined as one performance obligation and shareholder services as a separate performance obligation. 24. In accordance with FASB ASC , when there are multiple performance obligations, the distributor should determine the standalone selling price of each performance obligation and allocate the transaction price in proportion to those standalone selling prices. Paragraphs of FASB ASC provide guidance on allocating the transaction price to multiple performance obligations. 25. Variable consideration (and subsequent changes to that amount) should be allocated entirely to one or more, but not all, performance obligations or to one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation, if both of the following criteria in FASB ASC are met: a. The terms of the variable payment relate specifically to the entity s efforts to satisfy the performance obligation or transfer the distinct good or service, and b. Allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective in FASB ASC when considering all of the performance obligations and payment terms in the contract. 26. FASB ASC explains that the objective of allocating the transaction price to performance obligations is to allocate an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer. 27. If the distributor concludes that there are two performance obligations, one for sales and marketing and one for ongoing servicing, the transaction price should be allocated between the two performance obligations and the amount allocated to servicing recognized as discussed in FASB ASC Recognize revenue when (or as) the entity satisfies a performance obligation ( through and ) 28. For each performance obligation, in accordance with FASB ASC the distributor is required to determine whether that performance obligation is satisfied over time or at a point in time. If the criteria listed in FASB ASC for performance obligations satisfied over time are not met, then the performance obligation is considered to be satisfied at a point in time.

5 29. This analysis will vary depending on the services promised in a contract. For example, if the distributor s sole performance obligation is the sales of securities to investors, performance obligations may be considered to be fulfilled at a point in time (i.e., trade execution date). Once the trade is executed (e.g., shareholders purchase the securities), the distributor has a present right to payment from the fund (although certain of the fees may be variable based on future events). Additionally, once the trade is executed, the fund has the risks and rewards of the services provided (by accepting the shareholder s investment in the security). 30. If the contract promises shareholder services that meet the definition of a separate performance obligation, FinREC believes the performance obligation for providing shareholder services should be considered to be satisfied over time as the customer is simultaneously receiving and consuming the benefits provided by the distributor as the distributor performs this service in accordance with FASB ASC (a). Cost Recognition 31. Distributors often pay sales commissions to external distributors or its internal sales representatives for distribution and sales of securities on their behalf. FASB ASC refers to FASB ASC for guidance on costs incurred that relate to contracts with customers. In addition, FASB ASC also provides guidance on accounting for certain distribution costs. Distributors should evaluate the nature of the contracts and associated costs to determine whether Topic 946 or Topic 340 applies. 32. FASB ASC provides accounting guidance for two categories of costs related to contracts with customers: 1) incremental costs of obtaining a contract and 2) costs to fulfill a contract. If the fund is determined to be the customer in the contract, FinREC believes that sales commissions are costs to fulfill a contract, because the contract with the fund is already in place. 33. Costs incurred in fulfilling a contract with a customer that are within the scope of another Topic should be accounted for in accordance with those other Topics or Subtopics. In this regard, for sales commissions paid to third-party subdistributors, consideration should be given to the applicability of FASB ASC FASB ASC provides guidance on the accounting for distribution costs for mutual funds with no upfront fees. The term distribution costs as used in FASB ASC is interpreted in practice to refer to costs related to third-party service providers. This understanding is also acknowledged by the FASB in paragraph BC303 of FASB ASU , where this specific paragraph is mentioned in relation to sales commissions paid to third-party brokers. If FASB ASC applies, then incremental direct costs, such as sales commissions, should be deferred and amortized, and indirect costs expensed. For a similar analysis of deferred distribution commission expenses, refer to the discussion in the Deferred Distribution Commission Expenses ( back-end load funds ) section in paragraphs in the Asset Management chapter of the AICPA Audit and Accounting Guide: Revenue Recognition. 34. Other costs incurred to fulfill a contract with a customer that are not within the scope of another Topic should be assessed to determine if the costs meet the criteria of FASB ASC FinREC believes that sales commissions do not meet the criteria of FASB ASC as the commissions do not generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future (sub-paragraph (b) of FASB ASC ); therefore, sales commissions not in the scope of FASB ASC should be expensed when incurred. Comments should be received by March 1, 2018, and sent by electronic mail to Ivory Bare at ivory.bare@aicpa-cima.com, or you can send them by mail to Ivory Bare, Product Management and Development, AICPA, 220 Leigh Farm Road, Durham, NC DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2015 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC

Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition December 15, 2017 Financial Reporting Center Revenue Recognition Working Draft: Broker-Dealer Revenue Recognition Implementation Issue Issue #3-5: Investment Banking M&A Advisory Fees Expected Overall

More information

Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Broker-Dealer Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition November 1, 2017 Financial Reporting Center Revenue Recognition Working Draft: Broker-Dealer Revenue Recognition Implementation Issue Issue #3-4: Underwriting Revenues Expected Overall Level of Impact

More information

Working Draft: Telecommunications Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Telecommunications Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition December 1, 2017 Financial Reporting Center Revenue Recognition Working Draft: Telecommunications Revenue Recognition Implementation Issue Issue #15-6 Impact of enforceable rights and obligations on contract

More information

3. This paper focuses on extended warranty contracts, not written by an insurance entity, that meet the criteria in FASB ASC

3. This paper focuses on extended warranty contracts, not written by an insurance entity, that meet the criteria in FASB ASC February 1, 2018 Financial Reporting Center Revenue Recognition Working Draft: Accounting for Third Party Extended Service Warranty Contracts (Applicable to Non- Insurance Entities) - Revenue Recognition

More information

Step 5: Recognize Revenue When (or as) the Entity Satisfied a Performance Obligation

Step 5: Recognize Revenue When (or as) the Entity Satisfied a Performance Obligation February 1, 2018 Financial Reporting Center Revenue Recognition Working Draft: Aerospace and Defense Revenue Recognition Implementation Issue Issue #1-5: Transfer of Control on Non-US Federal Government

More information

Working Draft: Telecommunications Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Telecommunications Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition May 1, 2018 Financial Reporting Center Revenue Recognition Working Draft: Telecommunications Revenue Recognition Implementation Issue Issue #15-3 Contract Modifications Expected Overall Level of Impact

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-20 29 June 2017 Technical Line FASB final guidance How the new revenue standard affects asset managers In this issue: Overview... 1 Background... 2 Identifying the contract with a customer...

More information

Working Draft: Software Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Software Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition February 1, 2017 Financial Reporting Center Revenue Recognition Working Draft: Software Revenue Recognition Implementation Issue Issue #14-7: Significant Financing Components in Software Arrangements Expected

More information

Working Draft: Not-for-Profit Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Not-for-Profit Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition December 1, 2017 Financial Reporting Center Revenue Recognition Working Draft: Not-for-Profit Revenue Recognition Implementation Issue Issue #11-5: Not-for-Profit Subscriptions and Membership Dues Expected

More information

Working Draft: Allowance for Credit Losses Implementation Issue. Financial Reporting Center Credit Losses

Working Draft: Allowance for Credit Losses Implementation Issue. Financial Reporting Center Credit Losses October 30, 2018 Financial Reporting Center Credit Losses Working Draft: Allowance for Credit Losses Implementation Issue Issue #6: Reasonable and Supportable Forecast Developing the Period and Use of

More information

Working Draft: Health Care Entities Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Health Care Entities Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition October 2, 2017 Financial Reporting Center Revenue Recognition Working Draft: Health Care Entities Revenue Recognition Implementation Issue Issue #8-9 Risk Sharing Arrangements Expected Overall Level of

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-19 29 June 2017 Technical Line FASB final guidance How the new revenue standard affects brokers and dealers in securities In this issue: Overview... 1 Key industry considerations... 2 Scope...

More information

REVENUE RECOGNITION FOR BROKER-DEALERS AND INVESTMENT ADVISERS

REVENUE RECOGNITION FOR BROKER-DEALERS AND INVESTMENT ADVISERS REVENUE RECOGNITION FOR BROKER-DEALERS AND INVESTMENT ADVISERS December 7, 2017 RSM US LLP. All Rights Reserved. Your instructors Tracy Whetstone Partner, National Professional Standards Group Chicago,

More information

Working Draft: Gaming Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition

Working Draft: Gaming Revenue Recognition Implementation Issue. Financial Reporting Center Revenue Recognition February 1, 2018 Financial Reporting Center Revenue Recognition Working Draft: Gaming Revenue Recognition Implementation Issue Issue #6-13 Disclosures Contract with Customers Expected Overall Level of

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2016-26 27 July 2017 Technical Line FASB final guidance How the new revenue recognition standard affects automotive OEMs In this issue: Overview... 1 Vehicle sales... 2 Sales incentives... 2 Free goods

More information

Revenue for the engineering and construction industry

Revenue for the engineering and construction industry Revenue for the engineering and construction industry The new standard s effective date is coming. US GAAP December 2016 kpmg.com/us/frn b Revenue for the engineering and construction industry Revenue

More information

Revenue From Contracts With Customers

Revenue From Contracts With Customers September 2017 Revenue From Contracts With Customers Understanding and Implementing the New Rules An article by Scott Lehman, CPA, and Alex J. Wodka, CPA Audit / Tax / Advisory / Risk / Performance Smart

More information

REVENUE RECOGNITION PROJECT UPDATED OCTOBER 2013 TOPICAL CONTENTS

REVENUE RECOGNITION PROJECT UPDATED OCTOBER 2013 TOPICAL CONTENTS REVENUE RECOGNITION PROJECT UPDATED OCTOBER 2013 TOPICAL CONTENTS STEP 1: IDENTIFY THE CONTRACT WITH A CUSTOMER... 3 Contracts with Customers that Contain Nonrecourse, Seller-Based Financing... 3 Contract

More information

Changes to revenue recognition in the health care industry

Changes to revenue recognition in the health care industry Changes to revenue recognition in the health care industry Prepared by: Dan Vandenberghe, Partner, RSM US LLP dan.vandenberghe@rsmus.com, +1 612 376 9267 Jay Adkisson, Partner, RSM US LLP jay.adkisson@rsmus.com,

More information

Revenue Recognition: Manufacturers & Distributors Supplement

Revenue Recognition: Manufacturers & Distributors Supplement Revenue Recognition: Manufacturers & Distributors Supplement Table of Contents BACKGROUND & SUMMARY... 3 SCOPE... 5 THE REVENUE RECOGNITION MODEL... 5 STEP 1 IDENTIFY THE CONTRACT WITH A CUSTOMER... 5

More information

The New Era of Revenue Recognition. Chris Harper, CPA, MBA, Senior Manager

The New Era of Revenue Recognition. Chris Harper, CPA, MBA, Senior Manager The New Era of Revenue Recognition Chris Harper, CPA, MBA, Senior Manager Measuring Temperature What is your level of familiarity with revenue recognition standards that were issued in 2014? I practically

More information

Revenue Changes for Franchisors. Revenue Changes for Franchisors

Revenue Changes for Franchisors. Revenue Changes for Franchisors Revenue Changes for Franchisors Table of Contents INTRODUCTION... 4 PORTFOLIO APPROACH... 5 STEP 1: IDENTIFY THE CONTRACT WITH A CUSTOMER... 6 COMBINING CONTRACTS... 7 STEP 2: IDENTIFY PERFORMANCE OBLIGATIONS

More information

Power & Utilities Spotlight Generating a Discussion About the FASB s New Revenue Standard

Power & Utilities Spotlight Generating a Discussion About the FASB s New Revenue Standard August 2014 Power & Utilities Spotlight Generating a Discussion About the FASB s New Revenue Standard In This Issue: Background Key Accounting Issues Effective Date and Transition Implementation Challenges

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-27 25 August 2017 Technical Line FASB final guidance How the new revenue standard affects engineering and construction entities In this issue: Overview... 1 Identifying performance obligations

More information

Financial Reporting Brief: Roadmap to Understanding the New Revenue Recognition Standards

Financial Reporting Brief: Roadmap to Understanding the New Revenue Recognition Standards September 2016 Financial Reporting Center Financial Reporting Brief: Roadmap to Understanding the New Revenue Recognition Standards In May 2014, FASB issued Accounting Standards Update (ASU) 2014-09, Revenue

More information

New revenue guidance Implementation in the aerospace & defense sector

New revenue guidance Implementation in the aerospace & defense sector No. US2017-26 September 29, 2017 What s inside: Overview... 1 Scope 2 Identify the contract... 2 Identify performance obligations... 5 Determine the transaction price... 9 Allocate the transaction price

More information

Revenue Recognition: A Comprehensive Look at the New Standard

Revenue Recognition: A Comprehensive Look at the New Standard Revenue Recognition: A Comprehensive Look at the New Standard BACKGROUND & SUMMARY... 3 SCOPE... 4 COLLABORATIVE ARRANGEMENTS... 4 THE REVENUE RECOGNITION MODEL... 5 STEP 1 IDENTIFY THE CONTRACT WITH A

More information

A QUICK TOUR OF THE NEW REVENUE ACCOUNTING STANDARD

A QUICK TOUR OF THE NEW REVENUE ACCOUNTING STANDARD A QUICK TOUR OF THE NEW REVENUE ACCOUNTING STANDARD DISCLAIMER: Iconixx does not provide accounting advice. This material has been prepared for informational purposes only, and is not intended to provide,

More information

Sri Lanka Accounting Standard SLFRS 15. Revenue from Contracts with Customers

Sri Lanka Accounting Standard SLFRS 15. Revenue from Contracts with Customers Sri Lanka Accounting Standard SLFRS 15 Revenue from Contracts with Customers CONTENTS SRI LANKA ACCOUNTING STANDARD SLFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS paragraphs OBJECTIVE 1 Meeting the objective

More information

Technical Line Common challenges in implementing the new revenue recognition standard

Technical Line Common challenges in implementing the new revenue recognition standard No. 2017-28 24 August 2017 Technical Line Common challenges in implementing the new revenue recognition standard In this issue: Overview... 1 Key accounting and disclosure considerations. 2 Contract duration...

More information

Government Contractors: Are You Prepared for the New Revenue Standard? Presented by CohnReznick s Government Contracting Industry Practice

Government Contractors: Are You Prepared for the New Revenue Standard? Presented by CohnReznick s Government Contracting Industry Practice Government Contractors: Are You Prepared for the New Revenue Standard? Presented by CohnReznick s Government Contracting Industry Practice PLEASE READ This presentation has been prepared for information

More information

Revenue for the aerospace and defense industry

Revenue for the aerospace and defense industry Revenue for the aerospace and defense industry The new standard s effective date is coming. US GAAP December 2016 kpmg.com/us/frn b Revenue for the aerospace and defense industry Revenue viewed through

More information

Delegations will find attached document D044460/01 Annex 1.

Delegations will find attached document D044460/01 Annex 1. Council of the European Union Brussels, 18 April 2016 (OR. en) 8024/16 ADD 1 DRS 8 ECOFIN 299 EF 88 COVER NOTE From: To: European Commission No. Cion doc.: D044460/01 Subject: General Secretariat of the

More information

Revenue from Contracts with Customers

Revenue from Contracts with Customers International Financial Reporting Standard 15 Revenue from Contracts with Customers In April 2001 the International Accounting Standards Board (IASB) adopted IAS 11 Construction Contracts and IAS 18 Revenue,

More information

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model No. US2014-01 (supplement) July 16, 2014 What s inside: Overview... 1 Identifying performance obligations...

More information

Revenue Changes for Insurance Brokers

Revenue Changes for Insurance Brokers Insurance brokers will see a change in revenue recognition after adopting Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), which is now effective for public

More information

Revenue Recognition: A Comprehensive Look at the New Standard for the Construction & Real Estate Industries

Revenue Recognition: A Comprehensive Look at the New Standard for the Construction & Real Estate Industries Revenue Recognition: A Comprehensive Look at the New Standard for the Construction & Real Estate Industries Table of Contents BACKGROUND & SUMMARY... 3 SCOPE... 4 THE REVENUE RECOGNITION MODEL... 5 STEP

More information

Implementing the new revenue guidance in the technology industry

Implementing the new revenue guidance in the technology industry Grant Thornton January 2019 Implementing the new revenue guidance in the technology industry A supplement This publication was created for general information purposes, and does not constitute professional

More information

Memo No. 2. Meeting Date(s) PCC June 26, 2018

Memo No. 2. Meeting Date(s) PCC June 26, 2018 Memo No. 2 MEMO Issue Date June 15, 2018 Meeting Date(s) PCC June 26, 2018 Contact(s) Mary Mazzella Lead Author Ext. 434 Jason Bond Practice Fellow Ext. 279 John Schomburger PTA Ext. 443 Project Project

More information

Aerospace & Defense Spotlight The Converged Revenue Recognition Model Has Landed

Aerospace & Defense Spotlight The Converged Revenue Recognition Model Has Landed September 2014 Aerospace & Defense Spotlight The Converged Revenue Recognition Model Has Landed In This Issue: Background Key Accounting Issues Effective Date and Transition Challenges for A&D Entities

More information

ASC 606 REVENUE RECOGNITION. Everything you need to know now

ASC 606 REVENUE RECOGNITION. Everything you need to know now ASC 606 REVENUE RECOGNITION Everything you need to know now TOPICS 03 04 07 14 21 31 39 48 54 57 61 66 67 Introduction A revenue recognition primer Identifying the contract Identifying performance obligations

More information

Life Sciences Accounting and Financial Reporting Update Interpretive Guidance on Revenue Recognition Under ASC 606

Life Sciences Accounting and Financial Reporting Update Interpretive Guidance on Revenue Recognition Under ASC 606 Life Sciences Accounting and Financial Reporting Update Interpretive Guidance on Revenue Recognition Under ASC 606 March 2017 Revenue Recognition Background In May 2014, the FASB 1 and IASB issued their

More information

Revenue Recognition (Topic 605)

Revenue Recognition (Topic 605) Proposed Accounting Standards Update (Revised) Issued: November 14, 2011 and January 4, 2012 Comments Due: March 13, 2012 Revenue Recognition (Topic 605) Revenue from Contracts with Customers (including

More information

NARUC: REVENUE RECOGNITION JULIE PETIT AUDIT SENIOR MANAGER BRIAN JONES AUDIT SENIOR MANAGER MONDAY, SEPTEMBER 11 TH, 2017

NARUC: REVENUE RECOGNITION JULIE PETIT AUDIT SENIOR MANAGER BRIAN JONES AUDIT SENIOR MANAGER MONDAY, SEPTEMBER 11 TH, 2017 NARUC: REVENUE RECOGNITION JULIE PETIT AUDIT SENIOR MANAGER BRIAN JONES AUDIT SENIOR MANAGER MONDAY, SEPTEMBER 11 TH, 2017 Mazars USA LLP is an independent member firm of Mazars Group. Mazars USA LLP is

More information

The new revenue recognition standard retail and consumer products

The new revenue recognition standard retail and consumer products Applying IFRS in Retail and Consumer Products The new revenue recognition standard retail and consumer products May 2015 Contents Overview... 3 1. Summary of the new standard... 4 2. Scope, transition

More information

The new revenue recognition standard technology

The new revenue recognition standard technology No. 2014-16 26 August 2014 Technical Line FASB final guidance The new revenue recognition standard technology In this issue: Overview... 1 Scope, transition and effective date... 3 Summary of the new model...

More information

The new revenue recognition standard - software and cloud services

The new revenue recognition standard - software and cloud services Applying IFRS in Software and Cloud Services The new revenue recognition standard - software and cloud services January 2015 Overview Software entities may need to change their revenue recognition policies

More information

New Revenue Recognition Framework: Will Your Entity Be Affected?

New Revenue Recognition Framework: Will Your Entity Be Affected? New Revenue Recognition Framework: Will Your Entity Be Affected? One of the most significant changes to financial accounting and reporting in recent history is soon to be effective. Reporting entities

More information

Media & Entertainment Spotlight Navigating the New Revenue Standard

Media & Entertainment Spotlight Navigating the New Revenue Standard July 2014 Media & Entertainment Spotlight Navigating the New Revenue Standard In This Issue: Background Key Accounting Issues Effective Date and Transition Transition Considerations Thinking Ahead The

More information

Revenue from Contracts with Customers: The Final Standard

Revenue from Contracts with Customers: The Final Standard Revenue from Contracts with Customers: The Final Standard 1 TABLE OF CONTENTS Overview and effective date.... 3 Key provisions of the standard.... 3 Transition.... 12 Planning.... 13 How Experis Finance

More information

Revenue Recognition (Topic 605)

Revenue Recognition (Topic 605) Proposed Accounting Standards Update Issued: June 24, 2010 Comments Due: October 22, 2010 Revenue Recognition (Topic 605) Revenue from Contracts with Customers This Exposure Draft of a proposed Accounting

More information

Key Differences Between ASC (Formerly SOP 81-1) and ASC 606

Key Differences Between ASC (Formerly SOP 81-1) and ASC 606 Aerospace & Defense Spotlight February 2019 Key Differences Between ASC 605-35 (Formerly SOP 81-1) and ASC 606 The Bottom Line In May 2014, the FASB and the International Accounting Standards Board (IASB

More information

IFRS 15 for investment management companies

IFRS 15 for investment management companies IFRS 15 for investment management companies Are you good to go? Application guidance May 2018 Contents Contents Purpose of this document 1 1 Overview 2 2 Contracts partially in the scope of IFRS 15 5 3

More information

New Developments Summary

New Developments Summary June 5, 2014 NDS 2014-06 New Developments Summary A shift in the top line The new global revenue standard is here! Summary After dedicating many years to its development, the FASB and the IASB have issued

More information

Transition Resource Group for Revenue Recognition Sales-Based or Usage-Based Royalty with Minimum Guarantee.

Transition Resource Group for Revenue Recognition Sales-Based or Usage-Based Royalty with Minimum Guarantee. TRG Agenda ref 58 STAFF PAPER November 7, 2016 Project Paper topic Transition Resource Group for Revenue Recognition Sales-Based or Usage-Based Royalty with Minimum Guarantee CONTACT(S) Dan Drobac ddrobac@fasb.org

More information

FASB ASU NO REVENUE FROM CONTRACTS WITH CUSTOMERS (TOPIC 606)

FASB ASU NO REVENUE FROM CONTRACTS WITH CUSTOMERS (TOPIC 606) CPAs & ADVISORS experience clarity // REVENUE RECOGNITION FOR HEALTH CARE PROVIDERS Kimberly McKay, CPA Managing Partner BKD. LLP - Houston FASB ASU NO. 2014-09 REVENUE FROM CONTRACTS WITH CUSTOMERS (TOPIC

More information

(Text with EEA relevance)

(Text with EEA relevance) 29.10.2016 L 295/19 COMMISSION REGULATION (EU) 2016/1905 of 22 September 2016 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC)

More information

Revenue Recognition: Construction Industry Supplement

Revenue Recognition: Construction Industry Supplement Revenue Recognition: Construction Industry Supplement Table of Contents BACKGROUND & SUMMARY... 4 SCOPE... 5 THE REVENUE RECOGNITION MODEL... 5 STEP 1 IDENTIFY THE CONTRACT WITH A CUSTOMER... 6 Collectibility...

More information

FASB/IASB Joint Transition Resource Group for Revenue Recognition July 2015 Meeting Summary of Issues Discussed and Next Steps

FASB/IASB Joint Transition Resource Group for Revenue Recognition July 2015 Meeting Summary of Issues Discussed and Next Steps TRG Agenda ref 44 STAFF PAPER Project Paper topic November 9, 2015 FASB/IASB Joint Transition Resource Group for Revenue Recognition July 2015 Meeting Summary of Issues Discussed and Next Steps CONTACT(S)

More information

FASB/IASB Joint Transition Resource Group for Revenue Recognition Application of the Series Provision and Allocation of Variable Consideration

FASB/IASB Joint Transition Resource Group for Revenue Recognition Application of the Series Provision and Allocation of Variable Consideration TRG Agenda ref 39 STAFF PAPER Project Paper topic July 13, 2015 FASB/IASB Joint Transition Resource Group for Revenue Recognition Application of the Series Provision and Allocation of Variable Consideration

More information

Revenue recognition: A whole new world

Revenue recognition: A whole new world Revenue recognition: A whole new world Prepared by: Brian H. Marshall, Partner, National Professional Standards Group, RSM US LLP brian.marshall@rsmus.com, +1 203 312 9329 June 2014 UPDATE: To help address

More information

Revenue from Contracts with Customers (Topic 606)

Revenue from Contracts with Customers (Topic 606) No. 2016-12 May 2016 Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients An Amendment of the FASB Accounting Standards Codification The FASB Accounting

More information

New revenue guidance Implementation in the pharmaceutical and life sciences sector

New revenue guidance Implementation in the pharmaceutical and life sciences sector No. US2017-20 September 06, 2017 What s inside: Overview... 1 Scope... 2 Step 1: Identify the contract. 2 Step 2: Identify performance obligations.. 4 Step 3: Determine transaction price.7 Step 4: Allocate

More information

Revenue from contracts with customers. Health care services industry supplement

Revenue from contracts with customers. Health care services industry supplement Note: Since issuing the new revenue standard in May 2014, the FASB and IASB have proposed various amendments to the guidance. This In depth supplement has not been updated to reflect all of the proposed

More information

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model No. 2014-02 (supplement) 16 July 2014 What s inside: Overview... 1 Determining the unit of account... 2 Variable consideration and the constraint on revenue recognition..8 Significant financing components...

More information

Accounting for revenue - the new normal: Ind AS 115. April 2018

Accounting for revenue - the new normal: Ind AS 115. April 2018 Accounting for revenue - the new normal: Ind AS 115 April 2018 Contents Section Page Preface 03 Ind AS 115 - Revenue from contracts with customers 04 Scope 07 The five steps 08 Step 1: Identify the contract(s)

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-22 Updated 4 December 2017 Technical Line FASB final guidance How the new revenue standard affects life sciences entities In this issue: Overview... 1 Collaborative arrangements... 2 Effect of

More information

d. 8-4, Recognizing a CCRC s performance obligation(s) to provide future services and use of facilities to residents

d. 8-4, Recognizing a CCRC s performance obligation(s) to provide future services and use of facilities to residents June 1, 2017 Financial Reporting Center Revenue Recognition Working Draft: Health Care Entities Revenue Recognition Implementation Issue Issue #8-6 Presentation and Disclosure Expected Overall Level of

More information

Revenue Recognition. Task Force. Status of Implementation Issues. AICPA Financial Reporting Center. Revenue Recognition. aicpa.

Revenue Recognition. Task Force. Status of Implementation Issues. AICPA Financial Reporting Center. Revenue Recognition. aicpa. Task Force of Implementation Issues February, 08 AICPA Financial Reporting Center On May 8, 04, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 04-09, from Contracts

More information

Revenue from Contracts with Customers

Revenue from Contracts with Customers June 2010 Basis for Conclusions Exposure Draft ED/2010/6 Revenue from Contracts with Customers Comments to be received by 22 October 2010 Basis for Conclusions on Exposure Draft REVENUE FROM CONTRACTS

More information

Revised proposal for revenue from contracts with customers

Revised proposal for revenue from contracts with customers Applying IFRS in Oilfield Services IASB proposed standard Revised proposal for revenue from contracts with customers Implications for the oilfield services sector March 2012 2011 Europe, Middle East, India

More information

Revenue from Contracts with Customers

Revenue from Contracts with Customers Grant Thornton August 2017 Revenue from Contracts with Customers Navigating the guidance in ASC 606 and ASC 340-40 This publication was created for general information purposes, and does not constitute

More information

Revenue from Contracts with Customers

Revenue from Contracts with Customers R International Financial Reporting Standard 15 Revenue from Contracts with Customers IFRS 15 In April 2001 the International Accounting Standards Board (IASB) adopted IAS 11 Construction Contracts and

More information

IFRS News. Special Edition. on Revenue. A shift in the top line the new global revenue standard is here at last

IFRS News. Special Edition. on Revenue. A shift in the top line the new global revenue standard is here at last Special Edition on Revenue IFRS ews After more than five years in development the IASB and FASB have at last published their new, converged Standard on revenue recognition IFRS 15 Revenue from Contracts

More information

Revenue Recognition. Jaime Dordik. Assistant Project Manager, FASB March 26, 2017

Revenue Recognition. Jaime Dordik. Assistant Project Manager, FASB March 26, 2017 Revenue Recognition Jaime Dordik Assistant Project Manager, FASB March 26, 2017 Agenda Overview of New Revenue Standard 5 Steps to Apply the Standard Disclosure Requirements Transition Example Transition

More information

IFRS News. Special Edition. on Revenue. A shift in the top line the new global revenue standard is here at last. June 2014

IFRS News. Special Edition. on Revenue. A shift in the top line the new global revenue standard is here at last. June 2014 Special Edition on Revenue IFRS ews June 2014 After more than five years in development the IASB and FASB have at last published their new, converged Standard on revenue recognition IFRS 15 Revenue from

More information

NACUBO Advisory 19-01

NACUBO Advisory 19-01 Table of Contents Introduction...2 Tuition Contracts...2 Step 1: Identify the contract(s) with a customer...3 Step 2: Identify the performance obligations in the contract...4 Step 3: Determine the transaction

More information

ED revenue recognition from contracts with customers

ED revenue recognition from contracts with customers ED revenue recognition from contracts with customers An overview of the revised proposals 2 October 2012 Disclaimer This presentation contains information in summary form and is therefore not intended

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-14 22 June 2017 Technical Line FASB final guidance How the new revenue standard affects telecommunications entities In this issue: Overview... 1 Contract term... 2 Identifying performance obligations

More information

Revenue for Telecoms. Issues In-Depth. September IFRS and US GAAP. kpmg.com

Revenue for Telecoms. Issues In-Depth. September IFRS and US GAAP. kpmg.com Revenue for Telecoms Issues In-Depth September 2016 IFRS and US GAAP kpmg.com Contents Facing the challenges 1 Introduction 2 Putting the new standard into context 6 1 Scope 9 1.1 In scope 9 1.2 Out of

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-16 29 June 2017 Technical Line FASB final guidance How the new revenue recognition standard affects downstream oil and gas entities In this issue: Overview... 1 Scope and scope exceptions... 2

More information

ASSURANCE AND ACCOUNTING ASPE IFRS: A Comparison Revenue

ASSURANCE AND ACCOUNTING ASPE IFRS: A Comparison Revenue ASSURANCE AND ACCOUNTING ASPE IFRS: A Comparison Revenue In this publication we will examine the key differences between Accounting Standards for Private Enterprises (ASPE) and International Financial

More information

New revenue guidance Implementation in Industrial Products

New revenue guidance Implementation in Industrial Products No. US2017-16 August 17, 2017 What s inside: Overview... 1 Step 1: Identify the contract with the customer... 2 Step 2: Identify performance obligations... 4 Step 3: Determine... 5 Step 4: Allocate...8

More information

Defining Issues. Revenue from Contracts with Customers. June 2014, No

Defining Issues. Revenue from Contracts with Customers. June 2014, No Defining Issues June 2014, No. 14-25 Revenue from Contracts with Customers On May 28, 2014, the FASB and the IASB issued a new accounting standard that is intended to improve and converge the financial

More information

Financial reporting developments. The road to convergence: the revenue recognition proposal

Financial reporting developments. The road to convergence: the revenue recognition proposal Financial reporting developments The road to convergence: the revenue recognition proposal August 2010 To our clients and To our clients and other friends The Financial Accounting Standard Board (the

More information

Center for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members

Center for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members REPORT January 18, 2017 Center for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members ASU 2016-20: FASB ASC 606 Technical Corrections & Improvements Implementation

More information

IFRS 15 Revenue from Contracts with Customers Guide

IFRS 15 Revenue from Contracts with Customers Guide February 2017 Introduction... 5 Key Differences Between IFRS 15 and IAS 18/IAS 11... 6 Key Differences Between IFRS 15 and ASC 606... 7 Purpose and Scope... 9 Overview of the Five-Step Model... 10 Step

More information

ASC 606: Revenue from Contracts with Customers

ASC 606: Revenue from Contracts with Customers ASC 606: Revenue from Contracts with Customers Erin Roberts, Americas Leader of Engineering & Construction September, 2017 Countdown to adoption 2.2 months Mandatory adoption Calendar year-end public entities

More information

A shift in the top line

A shift in the top line A shift in the top line A new global standard on accounting for revenue The FASB, along with the IASB, has finally issued ASU 2014-09, Revenue from Contracts with Customers, its new standard on revenue.

More information

Applying IFRS in Engineering and Construction

Applying IFRS in Engineering and Construction Applying IFRS in Engineering and Construction The new revenue recognition standard July 2015 Contents Overview 3 1. Summary of the new standard 4 2. Effective date and transition 4 3. Scope 5 4. Identify

More information

In brief A look at current financial reporting issues

In brief A look at current financial reporting issues In brief A look at current financial reporting issues inform.pwc.com Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model No. INT2014-02 (supplement)

More information

Agenda. Overview of technical standard Amendments to date Impact on construction accounting Implementation action plan Industry initiatives Q&A

Agenda. Overview of technical standard Amendments to date Impact on construction accounting Implementation action plan Industry initiatives Q&A Agenda Overview of technical standard Amendments to date Impact on construction accounting Implementation action plan Industry initiatives Q&A Five Step Model Step 1 Step 2 Step 3 Step 4 Step 5 Identify

More information

Revenue Recognition. Task Force. Status of Implementation Issues. Revenue Recognition. aicpa.org/frc

Revenue Recognition. Task Force. Status of Implementation Issues. Revenue Recognition. aicpa.org/frc Task Force of Implementation Issues Financial Reporting Center On May 8, 0, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 0-09, from Contracts with Customers.

More information

4 Revenue recognition 6/08, 12/08, 6/11, 12/11, 6/13, 12/13,

4 Revenue recognition 6/08, 12/08, 6/11, 12/11, 6/13, 12/13, framework that does not explore such topics in more detail may have gaps that will make its applicability less useful. 3.11.2 The Financial Reporting Council (FRC) In a July 2015 meeting, the FRC s Accounting

More information

HKFRS / IFRS UPDATE 2014/09

HKFRS / IFRS UPDATE 2014/09 ISSUE 2014/09 JULY 2014 WWW.BDO.COM.HK s HKFRS / IFRS UPDATE 2014/09 REVENUE FROM CONTRACTS WITH CUSTOMERS Summary On 28 May 2014, the International Accounting Standards Board (IASB) and the US Financial

More information

PwC ReportingPerspectives July 2018

PwC ReportingPerspectives July 2018 July 2018 Table of contents Topic Page no. 4 24 37 40 43 2 PwC Editorial We are pleased to bring you the 15th edition of our quarterly newsletter covering the latest developments in financial reporting

More information

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model Asset management industry supplement

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model Asset management industry supplement Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model Asset management industry supplement INT2014-02 (supplement) September 2014 What s inside: Overview

More information

Revenue for power and utilities companies

Revenue for power and utilities companies Revenue for power and utilities companies New standard. New challenges. US GAAP March 2018 kpmg.com/us/frv b Revenue for power and utilities companies Revenue viewed through a new lens Again and again,

More information

Accounting Update Seminar: New Revenue Recognition and Lease Accounting

Accounting Update Seminar: New Revenue Recognition and Lease Accounting Accounting Update Seminar: New Revenue Recognition and Lease Accounting January 23, 2019 Presented by: Mark Hagander, Principal & Matt Cochran, Principal Revenue from Contracts with Customers (FASB ASC

More information

File Reference No Exposure Draft of a Proposed Accounting Standard Update - Revenue from Contracts with Customers

File Reference No Exposure Draft of a Proposed Accounting Standard Update - Revenue from Contracts with Customers March 13, 2012 Technical Director Financial Accounting Standards Board 401 Merritt 7 Norwalk, Connecticut 06856-5116 United States of America International Accounting Standards Board 30 Cannon Street London

More information