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The long awaited new US Generally Accepted Accounting Principles (GAAP) revenue recognition Standard, Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers (Topic 606), was released by the Financial Accounting Standards Board (FASB) on May 28, 2014. The Standard was a joint effort by the FASB and International Accounting Standards Board (IASB) thereby creating common revenue recognition guidance for US GAAP and International Financial Reporting Standards (IFRS).
The new guidance identifies how and when entities reporting under US GAAP should recognize revenue. Specifically, an entity should recognize revenue based on the transaction price, which is the amount of consideration the entity expects to be entitled to in exchange for transferring promised goods or services. A single principles-based, five-step revenue model must be applied to all contracts with customers; the steps to be applied are as follows:
For a public entity, ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. A public entity may be any one of the following:
For all other entities (i.e., non-public entities), ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. A non-public entity may opt for earlier application in accordance with one of the following options:
To access the full script of ASU No. 2014-09, click
For more information on the financial reporting library, contact a local MNP Assurance Professional, or Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of May 28, 2014. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2014. All rights reserved.
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