In May 2014, six years’ worth of planning, meetings, deliberations and proposals finally resulted in the convergence of a revenue recognition standard acknowledged by both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). This means that much of the existing Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) revenue recognition guidance will be replaced, making the potential impact to organizations worldwide significant. This update, Revenue from Contracts with Customers, will affect both public and private entities that enter into contracts with customers.
The core principle that guides this new standard is:
“To depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services.”
Revenue recognition will go into effect for reporting periods beginning after December 15, 2016 for public entities, including interim reporting periods therein; and after December 15, 2017 for private entities, and interim reporting periods within annual reporting periods beginning after December 15, 2018.
