Industry Supplements   |   November 2016
 

Revenue for consumer products companies

KPMG’s insights on industry ASC 606 implementation. With the new revenue recognition standard effective date approaching, KPMG offers insights on the most significant industry issues.

Applicability

Application of the new revenue standard

  • Company that is in the consumer products industry
  • Company that is currently assessing the impact of the new requirements of ASC Topic 606
  • Company that is at an advanced stage of its ASC Topic 606 implementation

Effective dates

Mandatory effective dates and early adoption provisions:

Annual periods:

For public business entities and certain not-for-profit entities the effective date for annual periods is the fiscal years beginning after Dec. 15, 2017.

For all other entites the effective date for annual periods is the fiscal years beginning after Dec. 15, 2018.

Interim periods:

For public business entities and certain not-for-profit entities the effective date for interim periods is the fiscal years beginning after Dec. 15, 2017.

For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2019.

Early adoption:

For public business entities and certain not-for-profit entities the effective date for early adoption is the fiscal years beginning after Dec. 15, 2016.

For all other entites the effective date for early adoption is the fiscal years beginning after Dec. 15, 2016.

Key impacts

  • Revenue may be reduced before an incentive offer is explicitly made based on a company’s past practice of providing incentives to end customers
  • Most retrospective volume rebates will have similar accounting to today. However, revenue may be deferred for certain discounts on future purchases
  • Most slotting fees will continue to reduce revenue
  • Revenue upon sale to the distributor will be deferred for promises to provide the end customer with an additional good or service
  • A portion of revenue earned on the sale of products may need to be allocated to equipment or merchandising services provided to the retailer
  • The balance sheet will be grossed up to present a refund liability and an asset for recovery. Some companies may experience a change in their estimates of returns
  • Certain types of arrangements will experience a change in the timing of revenue recognition
  • If a company provides a service in addition to a standard assurance warranty even if the service is not sold separately, a change in the accounting and amount of revenue recognized for the product may occur
  • Companies applying the sell-through method of accounting will likely experience an acceleration of revenue and cost recognition
  • Revenue from consignment arrangements is not recognized when products are delivered to the intermediary
  • Companies will no longer have the choice to expense commissions as incurred if certain criteria are met
  • Most principal versus agent conclusions are unlikely to change, but these conclusions should be analyzed under the new framework
  • Companies can elect to present sales taxes on a net basis or they can perform a jurisdictional analysis, which may result in some taxes being presented gross and others net

Report contents

  • Specific issues for consumer products companies
  • Expanded disclosures
  • Effective dates and transition
  • Impact on the organization

 

 

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