Industry Supplement | December 2016
 

Revenue for the engineering and construction industry

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

Applicability

Application of the new revenue standard

  • Company that is in the engineering and construction industry
  • Company assessing the impact of the new requirements of ASC Topic 606
  • Company 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

  • New criteria for contract existence may affect the timing of revenue recognition
  • Performance obligations are the new unit of account, which may affect the timing of revenue and margins each period. And tracking costs at this level may make implementation more difficult
  • New criteria to determine accounting for variable consideration require a change in perspective
  • Revenue may continue to be recognized over time for most construction contracts, but the timing and amount may change under the new standard
  • The timing for recognizing costs and revenue related to activities before the existence of a contract may change
  • Contractors will no longer have the choice to expense commissions as incurred if certain criteria are met

Report contents

  • Specific issues for companies in the engineering and construction industry
  • Expanded disclosures
  • Effective dates and transition
  • Impact on the organization

 

 

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