Revenue is one of the key items reported in an entity’s financial statements. It is an area that is complex for most companies and it is frequently plagued with errors and practice issues. Before the FASB Accounting Standards Codification™ (ASC or Codification) was launched, there were over 100 pieces of accounting literature in U.S. GAAP addressing revenue recognition. Although the revenue recognition accounting literature, except for industry guidance, is generally arranged and organized into a single topic in the Codification (ASC 605, Revenue Recognition ), the volume of the accounting literature and its complexity has not changed.
The resources assembled here are meant to provide you with useful background, guidance, and tools to address revenue recognition issues. Note, however, that this guidance is not a substitute for referral to and application of the authoritative accounting literature.
Proposed guidance
- Revenue recognition project nearing end (April 2, 2013)
The Boards have completed substantive redeliberations on their joint revenue recognition project. This bulletin summarizes the current status of the new model. - Principles-based revenue recognition
Revenue recognition is a major component of the joint Financial Accounting Standards Board/International Accounting Standards Board project which aims to converge U.S. GAAP and IFRS. In June 2010, the two Boards issued an Exposure Draft, Revenue from Contracts with Customers, that proposed major changes to how revenue is recognized in the financial statements.In this paper, Grant Thornton discusses the Exposure Draft with respect to the asset/liability approach to revenue recognition and its implications on accounting for executory contracts.
General
- Revenue recognition: A guide to navigating through the maze (November 12, 2010)
The complexity in the authoritative guidance on revenue recognition makes it difficult to know when and how to appropriately record revenue. This implementation guide is intended to provide a road map to assist users in navigating through the maze of certain accounting literature related to revenue recognition. - Determining the best estimate of selling price
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements, to amend ASC 605-25, Revenue Recognition: Multiple-Element Arrangements. The revisions to the multiple-element arrangement guidance introduced by ASU 2009-13 include a provision that in certain circumstances allows for management to use “best estimate of selling price” in determining how much revenue to allocate to each unit of accounting.
Technology
- Does VSOE still exist after relative selling price allocation
ASU 2009-13 introduces the concept of estimated selling price and requires arrangement consideration to be allocated on a relative selling price basis. The ASU also requires use of a selling price hierarchy. This article discusses the application of the new guidance by companies that sell hardware with embedded software in bundled arrangements with nonessential software. - Revenue recognition for software companies: Making sense of VSOE, discounts and concessions (September 2008)
This article discusses the nuances of the vendor-specific objective evidence (VSOE) of fair value requirement of AICPA Statement of Position 97-2, Software Revenue Recognition, including the impact of offering concessions and discounts in software arrangements. - Replay the Impact of Revised Revenue Recognition Proposal on Technology Companies webcast
Replay this webcast covering the basic model in the revised revenue proposal, the differences from current U.S. GAAP and the potential impact on technology companies.
