Industry Supplement | November 2016
 

Revenue for manufacturers

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

Applicability

Application of the new revenue standard

  • Company that is in the transportation (freight and logistics) 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

  • Potential acceleration in the timing of revenue and cost recognition for manufacturers that produce goods specifically for an individual customer based on that customer’s design
  • Certain types of arrangements will experience a change in the timing of revenue recognition based on when control transfers to the customer
  • Accounting for shipping depends on a company’s policy election
  • Potential acceleration in the timing of revenue, cost and margin recognition for manufacturers that are in the scope of the series guidance
  • Potential changes in the timing of recognizing cost and revenue related to activities prior to existence of a contract
  • Pre-production activities may be a separate performance obligation
  • Most retrospective volume discounts will have similar accounting to today. However, revenue may be deferred for certain discounts on future purchases
  • There will no longer be a choice for companies to expense commissions as incurred if certain criteria are met
  • Revenue recognized for long-term contracts may be affected by a significant financing component
  • If a manufacturer 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
  • An explicit customer request and a specified delivery schedule are no longer required to recognize revenue under a bill-and-hold arrangement
  • Accounting for contract modifications is now included in a general framework

Report contents

  • Specific issues for manufacturers
  • Expanded disclosures
  • Effective dates and transition
  • Impact on the organization

 

 

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