by Michael Kuchar, CPA, Audit Manager, Construction Industry Lead, TR Moore & Company, A Doeren Mayhew Firm
Businesses with contracts to provide goods or services to customers may be in for drastic changes in how revenue is recognized, with the Financial Accounting Standards Board (FASB) releasing a revised draft of proposed ASU No. 201-230, Revenue From Contracts With Customers, on Nov. 14, 2011.
The core principle of the revised proposal is the same as the exposure draft issued in 2010: an entity would recognize revenue from contracts with customers when it transfers promised goods or services to the customer. The five steps for applying this principle also remain relatively unchanged:
- Identify the contract with the customer
- Identify the separate performance obligations
- Determine the transaction price
- Allocate the transaction price to the separate performance obligations
- Recognize revenue when (or as) the entity satisfies each performance obligation
The comment period for the revised proposed standard is open through March 13, 2012. Final guidance is not expected to be effective earlier than years beginning on or after Jan. 1, 2015, with the effective date for nonpublic companies at least one year later.
We will provide updates as they are available. In the mean time, you can explore the proposed principle and what it means for your business in our new e-paper, “Revenue From Contracts With Customers: Understanding Proposed ASU No. 2011-230.”
Download complimentary e-paper.
As an Audit Manager, Michael Kuchar leverages nearly 15 years experience to lead TR Moore & Company’s construction industry niche, which offers traditional audit and accounting services as well as assistance with cash flow management, labor/subcontractor issues, industry benchmarking and more. For more information, contact us.
