ASU 2014-09 REVENUE FROM CONTRACTS WITH CUSTOMERS (TOPIC 606)
On May 28, 2014, the FASB completed its Revenue Recognition project by issuing Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance establishes the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers.
To that end, the new guidance:
- Removes inconsistencies and weaknesses in existing revenue requirements
- Provides a more robust framework for addressing revenue issues
- Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets
- Provides more useful information to users of financial statements through improved disclosure requirements
- Simplifies the preparation of financial statements by reducing the number of requirements to which an organization must refer.
- Public organizations: the new guidance on revenue recognition is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the original effective date of December 15, 2016 by one year. Early application is permitted as of the original effective date.
A public organization is an organization that is any one of the following:
- A public business organization
- A not-for-profit organization that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market
- An employee benefit plan that files or furnishes financial statements to the U.S. Securities and Exchange Commission.
- For nonpublic companies and organizations (including not-for-profits): the new guidance was required for annual reporting periods beginning after December 15, 2018, and interim and annual reporting periods after those reporting periods. Nonpublic companies and organizations may elect early application, but no earlier than the effective date for public entities. Accounting Standards Update No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, defers the effective date by one year for certain entities that had not yet issued their financial statements (or made financial statements available for issuance) reflecting the adoption of Revenue, as of the date the ASU was issued (June 3, 2020).
To Learn More
- Educational Resources
- Revenue Recognition: Objectives —a video featuring FASB Fellow Kristin Bauer and FASB Chairman Russell Golden
- Revenue Recognition: Recognition & Measurement —a video featuring FASB Practice Fellow Kristin Bauer and FASB Chairman Russell Golden
Revenue Recognition: Disclosures
—a video featuring FASB Practice Fellow Brian Schilb and FASB Member Marc Siegel
- The FASB and the IASB have established a FASB/IASB Joint Transition Resource Group for Revenue Recognition to help the Board evaluate the need for implementation guidance.
- The FASB issued additional Updates related to Topic 606, Revenue from Contracts with Customers, to address challenges identified by the TRG in implementing and applying the new revenue standard in certain areas.
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