For the past few years, we have kept a close eye on the future impact and implementation of ASC 606, the new revenue recognition standard. ASC 606 changes how most construction companies are required to recognize revenue under US generally accepted accounting principles (GAAP)—specifically contracts with customers and is. All companies are now required to adopt these new standards for 2019. This industry-standard revenue recognition model was designed to help streamline company and industry financial statements for comparability, with the overall goal to decrease the complexity of revenue recognition. But in some cases, it has created more questions and different interpretations. As member of the CICPAC (Construction Industry CPAs & Consultants) Association, we have been provided with the following three whitepapers that are available for download:
1. Revenue Recognition (ASC 606) Terminology & Concepts
Part of learning the standard is understanding the terminology and concepts. CICPAC has compiled this Revenue Recognition Terminology & Concepts document to summarize the new terms as they relate to the old terms or to define what the new terms are referencing.
2. Using the Modified Retrospective Transition Method
The modified retrospective method approach differs from the full retrospective method in that prior year financial statements are not restated. Instead, disclosure is required of differences in each line of the financial statements causing revenue recognized in 2019 under Topic 606 to differ from revenue that would have been reported using former accounting guidance if comparative financial statements are presented. This helpful resource will walk you through the steps needed to take this approach.
3. Retention Receivable Guidance
The question many experts have regarding retainage under ASC 606 is whether retention receivable is to be presented as an account receivable or a component of contract asset.The final determination of classification will be based upon a careful review of several factors. This guide will help you properly classify your contracts’ rentention receivables.
To download these free resources, please submit the form below:
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