Liz Farr, CPA has published an easy to understand, 3-minute read, on the new revenue recognition standard (FASB ASC 606) that will impact both public and non-public companies. This latest article titled, Two Choices for Transitioning to ASC 606 - and Each One Isn't Easy can be found on Intuit's Firm of the Future Blog. She simply explains the two basic options for compliance:
- Modified Recognition (Cumulative Effect Adjustment) method, and the
- Full Retrospective method
As part of her presentation she provides a scenario in which a fictional company she calls, GiggleMore is used to show the differences of each method. I would say that this is written for the average business reader and written in a manner that most should understand both the implications and complexity of the new requirement.
The ASC 606 guidance is effective for public companies for fiscal periods starting after December 15, 2017. Non-public companies received an extra year for compliance, they must implement the standard for fiscal periods after December 15, 2018.
Ms. Far had previously written several related articles also found on Intuit's Firm of the Future blog including:
- Are You Ready for the New Revenue Recognition Standard?
- Timing is Everything with ASC 606: The New Revenue Recognition Standard
- How to Account for Contract Costs Under the New Revenue Recognition Standard
All of these are outstanding resources for not only professionals preparing financials (although these are only summary articles and not intended to provide in-depth guidance on compliance) but reliable explanations that business owners and managers should be able to comprehend without needing the more 'in-depth' understanding accountants, auditors, tax professionals and bookkeepers will require.
I encourage all of our Insightful Accountant readers to review each of the referenced Firm of the Future blog articles for more information about these important changes in financial reporting requirements.