Defining Issues  |  August 2017

 

 

SEC comments on pre-production costs and customer reimbursements under ASC 606

KPMG reports on discussions with the SEC staff on adopting ASC 606 and ASC 340-40. A registrant may, in some cases, continue to apply historical accounting policies to pre-production costs and related customer reimbursements on adoption of the new revenue standard.

Applicability

Applying the new revenue recognition standard

  • Suppliers who are SEC registrants that engage in pre-production activities associated with long-term supply arrangements

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

  • Many registrants have disclosed that they may change how they account for pre-production costs and customer reimbursements when they adopt ASC 606 and ASC 340-40. Following the SEC staff comments, registrants should reevaluate their disclosures related to pre-production activities.
  • A registrant may, in some cases, continue to apply historical accounting policies to pre-production costs and related customer reimbursements on the adoption of ASC 606 and ASC 340-40.

Report contents

  • Applicability
  • Key facts and impacts
  • Pre-production activities
  • Current guidance
  • Views on revenue – ASC 606
  • Views on costs – ASC 340-40

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