Implementing Variable Considerations in Revenue Recognition

Ning Du, PhD, and Ray Whittington, PhD

In May 2014, FASB and the IASB released a final, converged standard on revenue recognition [see Accounting Standards Update (ASU) 2014-09 and IFRS 15]. The new standard introduces sweeping changes to the accounting landscape and imposes new challenges on financial statement preparers and users. The new standard, as codified in ASC Topic 606, “Revenue from Contracts with Customers,” and IFRS 15, Revenue from Contracts with Customers, eliminates industry-specific revenue guidance and dramatically changes revenue recognition for many companies, especially for those in the software, media, and telecommunications industries. It replaces nearly all existing U.S. GAAP and IFRS guidance with a single principles-based model for recognizing revenue from customer contracts. The standard is effective for reporting periods beginning after December 15, 2017, and interim and annual reporting periods thereafter.