Handbooks | December 2020
Using detailed Q&As and examples, KPMG explains how the revenue standard (ASC 606) applies to software licensing and SaaS arrangements. Our latest guide is updated for continuing developments in practice.
Applicability
ASC 606 and ASC 340-40
- All software and software-as-a-service companies
Relevant dates
Effective date |
Public business and certain other entities* | Other entities that had not issued or made available for issuance financial statements as of June 3, 2020** |
|---|---|---|
Annual periods – Fiscal years beginning after |
Effective |
Dec. 15, 2019 |
Interim periods – In fiscal years beginning after |
Effective |
Dec. 15, 2020 |
Early adoption allowed in 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; (3) employee benefit plans that file financial statements with the SEC; and (4) other entities that issued (made available for issuance) financial statements reflecting the adoption of ASC 606 prior to June 3, 2020. |
||
** ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, deferred the effective date for those specific other entities by one year. |
||
Key impacts
This December 2020 edition includes new and updated interpretations based on our experiences with companies applying ASC 606, as well as discussions with the FASB and SEC staff.
Incorporates the following:
- ASU 2020-10, Codification improvements
- ASU 2020-05, Effective dates for certain entities (revenue and leases)
- ASU 2019-08, Shared-based consideration payable to a customer.
- ASU 2018-18, Targeted improvements for collaborative arrangements.
- ASU 2018-08, Clarifying the scope and accounting guidance for contributions received and contributions made.
- ASU 2018-07, Improvements to nonemployee share-based payment accounting.
- ASU 2016-20, Technical corrections and improvements to ASC 606.
- ASU 2016-12, Narrow scope improvement and practical expedients
- ASU 2014-09, Revenue from contracts with customers.
- ASU 2016-11, ASU 2017-13, and ASU 2017-14, Amendments to SEC guidance related to ASC 606.
Report contents
- Software and SaaS industry overview
- Scope
- Step 1: Identify the contract with the customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
- Contract modifications
- Contract costs
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