Issues In-Depth   |   May 2016
 

Revenue: It’s time to engage

KPMG’s insights on the latest of everything you need to know about ASC 606. KPMG gives examples and discusses what companies have found most complex about the new revenue standard, and the latest FASB and IASB developments.

Applicability

  • 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
  • Company that is comparing US GAAP to IFRS

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.

* (1) public business entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market; and (3) employee benefit plans that file financial statements with the SEC.

Key impacts

  • Revenue may be recognized at a point in time over time
  • Revenue recognition may be accelerated or deferred
  • Revisions may be needed to tax planning, covenant compliance, and sales incentive plans
  • Sales and contracting processes may need to be reconsidered
  • IT systems may need to be updated
  • New estimates and judgments will be required
  • Accounting processes and internal controls will need to be revised
  • Extensive new disclosures will be required
  • Companies will need to communicate with stakeholders

The impact of the new standard will vary by industry. Those steps of the model that are most likely to affect the current practice of certain industries are summarized below.

Report contents

  • Putting the new standard into context
  • Scope
  • The model
  • Contract costs
  • Contract modifications
  • Licensing
  • Sales outside ordinary activities
  • Other issues
  • Presentation
  • Disclosure
  • Effective date and transition
  • Implementation considerations

 

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