Handbook: Revenue recognition

Using detailed Q&As and examples as well as comparisons to legacy US GAAP, KPMG explains in-depth accounting for ASC 606.

Applicability

ASC 606, ASC 340-10, ASC 340-40 and ASC 610-20

• All companies

Relevant dates

Effective immediately

Key impacts

The implementation and ongoing application of Topic 606 is not a simple exercise – it requires more judgment, estimation and disclosures. Changes in business practices and the economic environment continue to create new challenges to the accounting for revenue.

In response to these challenges, companies evaluate and may need to revisit a number of estimates and judgments to account for their revenue arrangements and related costs. Companies may also apply certain aspects of the guidance that they had not, or less frequently, applied in the past.

In this publication, we focus on the accounting and disclosure aspects of Topic 606. Questions continue to arise as companies enter into new or modified revenue arrangements or respond to a changing economic environment. The interpretation of the principles in Topic 606 continues to be informed by evolving practice issues and regulator views.

Our purpose in this updated publication is to assist you in gaining an in-depth understanding of the five-step revenue model by answering the questions that we are encountering in practice, providing examples to explain key concepts, and explaining the changes from legacy US GAAP.

Report contents

• Scope
• Step 1: identify the contract(s) with a customer
• Step 2: identify the performance obligations in the contract
• Step 3: determine the transaction price
• Step 4: allocate the transaction price to performance obligations
• Step 5: recognize revenue when (or as) the entity satisfies a performance obligation
• Customer options for additional goods or services
• Principal vs. agent
• Licensing of intellectual property
• Contract modifications
• Contract costs
• Loss contracts
• Presentation and disclosure
• Effective date and transition
• Derecognition of nonfinancial assets

Related content

Handbook: Revenue for software and SaaS

Revenue Q&A: Real estate