Software revenue recognition journal of accountancy, vol. Each task force will create an industryspecific accounting guide on revenue recognition, including illustrative examples of how companies should apply the new guidance. Judith weiss, formerly a senior manager in the national accounting and auditing department of grant thornton, is. The revenue recognition standard affects all entitiespublic, private, and notfor profitthat have contracts with customers. The fasb and iasb replaced industryspecific guidance on revenue recognition in favor of a single model.
The asset management revenue recognition task force will be conducting an informational webcast on november 8, 2017 from 1. Implementing revenue recognition for health care organizations. The new revenue recognition standard will eliminate transaction and industryspecific guidance under current u. Based on work of the 16 aicpa industry task forces for revenue recognition, the aicpas financial reporting executive committee finrec has issued working drafts of revenue recognition accounting issues that include proposed content for the new aicpa accounting guide on revenue recognition that addresses asu 201409, revenue from. To link to this page, paste this link in email, im or document. The american institute of certified pu blic accountants aicpa established a software industry task force that is one of 16 industry task forces the aicpa has formed to help develop a new accounting guide on revenue recognition under us gaap and to aid industry stakeholders in implementing the standard. What government contractors should know about the new.
Asset management revenue recognition task force aicpa. Subsequent to the issuance of fasb accounting standard update asu 201409, revenue from contracts with customers topic 606, the aicpa formed 16 industry task forces to help develop an accounting guide on revenue recognition. Citeseerx document details isaac councill, lee giles, pradeep teregowda. In the gaming industry, its critical for financial statement preparers and auditors to stay current with new accounting standards. The accounting implementation issues discussed in the new chapter, like other guidance in aicpas. Based on work of the 16 aicpa industry task forces for revenue recognition, the aicpas financial reporting executive committee finrec has issued working drafts of revenue recognition accounting issues that include proposed content for the new aicpa accounting guide on revenue recognition that addresses asu 201409. He is a member of the fasb emerging issues task force, and a former member of the auditing standards board asb of the american institute of certified public accountants and the aicpa auditing issues task force. Revenue recognition resources provide information, guidance and other. Aicpa accounting guide on revenue recognition update. The original effective date for the converged guidance was january 1, 2017, for calendaryear public companies. Implementing the future of learning recommendations. Aicpa issues 7 new drafts on revenue recognition questions.
The software entities revenue recognition task force has been created to address issues which may arise due to fasbs new revenue recognition standard. Aicpa financial reporting center revenue recognition task. To embed the entire object, paste this html in website. Paul vigil, senior director, revenue recognition, bmc softwarepaul vigil, senior director, revenue recognition, bmc software, discusses the challenges of working with a standard that lacks implementation guidance for industries. As a result, many public entities have now disclosed the impact of adopting asc 606 within their interim financial reports on form 10q. Health care entities revenue recognition task force aicpa. More revenue recognition working drafts issued by aicpa. Standards board iasb joint transition resource group for revenue recognition trg and the american institute of certified public accountants aicpa industry task forces are actively discussing issues. Aicpa industry task forces weighing in on asc 606 implementation. In the case of companies licensing software to an end. Given the various revenue streams encountered by entities in the health care industry, the american institute of cpas aicpa has established a health care entities revenue recognition task force.
The health care industry task force identified 11 implementation issues. Software revenue recognition journal of accountancy. The aicpas telecommunications entities revenue recognition task force is hard at work identifying revenue recognition accounting issues pertaining to the telecommunication industry. Both boards amended their standards resulting in some additional differences for a summary of all differences between asc 606 and ifrs 15. Aerospace and defense revenue recognition task force aicpa. May 21, 2018 identify the fasb asc 606 implementation issues for software entities.
The fasb asked the aicpa to pursue the revenue side of the project after the aicpa published an issues paper on software revenue recognition in april 1987. This guide on revenue recognition encompasses the efforts of the aicpas 16. Below is a list of potential revenue recognition implementation issues identified by the timeshare entities revenue recognition task force. The list will be updated as the task force continues its discussions. The aicpa says the guide will provide helpful hints and illustrative examples to help. How the revenue recognition standard impacts healthcare entities. Abstract the accounting standards committee of the american institute of certified public accountants issued a paper to the financial accounting standards board on the recognition of revenue on the sale and licensing of computer software. The aicpa software entities revenue recognition task force was formed to develop new accounting guidance on fasb based revenue recognition standards. The new chapter of the revenue recognition aag was developed by the aicpa hospitality entities revenue recognition task force and approved by the aicpa revenue recognition working group and aicpa financial reporting executive committee finrec. Executive summary statement of position sop 972 provides guidance on applying gaap in recognizing revenue from software and software related transactions.
Sweeping changes in the fasbs new revenue recognition model became effective q1 2018 for most. The list will be updated as the task force continues it discussions. Kimberly mckay, bkd, llp chair mike breen, kpmg llp. The engineering and construction revenue recognition task force will. Retail and consumer revenue recognition and the implications of the new standard can be complicated to navigate. Aicpa revenue recognition task forces are charged with developing revenue recognition implementation issues that will provide helpful hints and illustrative examples for how to apply the new revenue recognition standard. Asc 606 is about to become a reality for private companies, and now is the time to make a move to adopt the new standard. Healthcare notforprofit specialty serving organizations including hospice, ccrcs, fqhcs, snfs and other social service entitles. This guide on revenue recognition encompasses the efforts of the aicpas 16 industry task forces that were created back in 2014 to address industryspecific accounting implementation issues as a result of the issuance of the new standard. Aicpa adds industry guidance to revenue recognition guide.
Revenue is one of the most important measures used by investors in assessing a companys performance and prospects. Aicpa statement of position 989, modification of sop 972, software revenue recognition, with respect to certain transactions fasb emerging issues task force 003, application of aicpa statement of position 972 to arrangements that include the right to use software stored on another entitys hardware. New revenue recognition accounting standardlearning aicpa. In a recent blog, we looked at the impact that the new standard has on aerospace and defense contractors and airlines, and today, we would like to turn our attention to companies that work in the financial instrument space. Mar 25, 2019 as the required adoption dates for nonpublic entities approach, the american institute of cpas aicpa has issued clarification on ccrcspecific topics that were addressed by its health care entities revenue recognition task force, which is now included in the aicpas revenue recognition guide. Jun, 2018 given the various revenue streams encountered by entities in the health care industry, the american institute of cpas aicpa has established a health care entities revenue recognition task force.
Although the new guidance is principlesbased, it is critical that companies across the software industry apply it consistently so that similar types of revenue transactions are. To link to the entire object, paste this link in email, im or document. Asc 606 replaces most existing revenue recognition guidance and brings. Gaap and replace it with a principle based approach for determining revenue recognition. Innovate and experiment ignite a passion for learning make learning personal measure what matters these recommendations and insights, as well as other. As technology becomes further entrenched in consumer and enterprise products, companies outside of the traditional software. The advisory conclusion reached by the aicpa task force on this issue was to recognize the revenue upon delivery. That prompted the aicpa to form the industry task forces, whose work when completed will be compiled into a single accounting guide on revenue recognition. The aicpa says the guide will provide helpful hints and illustrative examples to help companies work through industyrspecific questions. The financial accounting standards boards fasb accounting standard on revenue recognition, fasb asu 201409, eliminates the transaction and industryspecific guidance under current u. This guide on revenue recognition encompasses the efforts of the aicpa s 16 industry task forces that were created back in 2014 to address industryspecific accounting implementation issues as a result of the issuance of the new standard. Do you agree with the task forces decision to address this issue considering potential overlap between this issue and the fasb and iasb joint revenue recognition project.
The information on the task forces webpage will be updated as the group continues its discussions. Software revenue recognition a roadmap to applying aicpa. Please consult your warren averett advisor for more information specific to revenue recognition and your business. While the new revenue recognition standard has and will affect entities differently depending on their facts and circumstances, we have briefly summarized for corporate executives cxos some of the common significant themes associated with its application by entities in the software and softwareasaservice saas sectors, using insights and perspectives learned in the past year. Aicpa store revenue recognition tools and resources. However, previous revenue recognition guidance differs in generally accepted accounting principles gaap and international financial reporting standards ifrsand many believe both standards were in need of improvement. Oct, 2015 the aicpas telecommunications entities revenue recognition task force is hard at work identifying revenue recognition accounting issues pertaining to the telecommunication industry. Aicpa financial reporting center revenue recognition revenue recognition task force status of implementation issues on may 28, 2014, the financial accounting standards board fasb issued accounting standards update asu 201409, revenue from contracts with customers. Jan 26, 2018 the new chapter of the revenue recognition aag was developed by the aicpa hospitality entities revenue recognition task force and approved by the aicpa revenue recognition working group and aicpa financial reporting executive committee finrec. Effect on revenue recognition 49 evidence of an arrangement 49.
The task force has been charged with developing revenue recognition issues, specific to health care entities, that will provide useful information. Revenue recognition from contracts with customers aicpa. The sops basic principle in software revenue should be recognized at the time the software is delivered. Understand the task force discussions on the implementation issues. With the beginning of the fasbiasb standards on revenue recognition asc 606ifrs 15 rapidly approaching, the american institute of cpas aicpa issued a 157page guide in january on how the new standard will affect the auditing and accounting process, and is now requesting feedback on five new working drafts of accounting issues pertaining to the. Brian murray member of the aicpas health care entities task force. As the required adoption dates for nonpublic entities approach, the american institute of cpas aicpa has issued clarification on ccrcspecific topics that were addressed by its health care entities revenue recognition task force, which is now included in the aicpas revenue recognition guide. The webcast will discuss fasb asc 606 implementation issues for asset management entities, and provide insight into the development of the issues and potential changes in practice. Identify the fasb asc 606 implementation issues for software entities. December 5, 2016 the american institute of cpas aicpa has issued a report that lists revenue recognition issues for software related entities. Gaap and replaces it with a principlesbased approach. The aicpa has also created a revenue recognition working group, and task forces are studying specific implementation issues unique to 16 industries, including software.
Understand the potential changes in practice related from the adoption of fasb asc 606. It incorporates previously issued fasb staff and transition resource group trg. As a result of comments received and in connection with issue 093 the task force made substantive changes to issue 081. The guide was developed by the aicpa industry revenue recognition task forces, revenue recognition working group and auditing revenue task force. May 16, 2017 subsequent to the issuance of fasb accounting standard update asu 201409, revenue from contracts with customers topic 606, the aicpa formed 16 industry task forces to help develop an accounting guide on revenue recognition.
Do you agree with the task forces decision to modify the scope of sop 972 to address software enabled devices rather than to address broadly the measurement and. Implementing the future of learning recommendations aicpa. Sep 26, 2014 in may 2014, the aicpas future of learning task force announced four broad recommendations to positively impact the future of learning for the cpa profession. The working drafts are the result of an ongoing effort by 16 industry task forces to compile implementation issues that will be added to a new aicpa revenue recognition guide.
Forprofit and notforprofit hospitals and health systems, specialty. Changes to the accounting for multiple element arrangements under aicpa statement of position 972, software revenue recognition, that contain softwareenabled products. Tackling the systems side of the new revenue recognition standard. Technology providers with revenue recognition software solutions industryspecific journals and publications the implementation task force and or the project sponsors need to be responsible for informing, educating, and providing training to key organizational personnel about the new standard, including. The financial accounting standards boards fasbs new revenue recognition standard asc 606 was effective for annual reporting periods beginning after december 15, 2017, for public entities. Revenue recognition retail and consumer industry warren. Aug 26, 2016 regulations update on revenue recognition issues affecting software companies. Asb of the american institute of certified public accountants and the aicpa auditing issues task force. The sop provides instruction on recognition for licensing, selling, leasing or otherwise marketing software. Although the new revenue standard is not yet effective for private companies, the january 2019 effective date is quickly approaching and companies should be focused on assessing the accounting and operational impacts of the new standard.
Below is a list of potential revenue recognition implementation issues identified by the aerospace and defense revenue recognition task force. New revenue recognition standard means big changes for. Among them was telecommunications telecom, for which the revenue recognition transition resource group and aicpas telecommunications entities revenue recognition task force have tackled some of the most challenging issues faced while implementing asc 606. The aicpa has formed industryspecific task forces to develop their new aicpa accounting guide on revenue recognition. He describes his work as part of the american institute of cpas task force that is providing guidance for the. Aerospace and defense revenue recognition task force.
In this position, he is responsible for all accounting and auditing policies and overseeing all technical matters for clients. Main provisions of the new standard the new standard is more principlebased than current revenue recognition guidance and will require government contractors to exercise more judgement. Mar 16, 2017 with the beginning of the fasbiasb standards on revenue recognition asc 606ifrs 15 rapidly approaching, the american institute of cpas aicpa issued a 157page guide in january on how the new standard will affect the auditing and accounting process, and is now requesting feedback on five new working drafts of accounting issues pertaining to the implementation of the standard. Aicpa technical practice aids background and level of authority 21. Join redws bruce bleakman, principal and aicpa revenue recognition task force member, and stephen montoya, redw senior manager, to learn how the fasbs new revenue recognition standards apply to tribal gaming entities, including. Revenue recognition for hardware deliverables in software arrangements 48 141. Ways of doing business continue to evolve as do the views of the standard setters and regulators. Aicpa issues new revenue recognition guide cpa practice advisor. Citeseerx aicpa statement of position 972, software. Software entities revenue recognition task force aicpa. Changes to the accounting for multiple element arrangements under aicpa statement of position 972, software revenue recognition, that contain software enabled products. Software used with multiple units of an electronic device 47 6. The issue is whether nonsoftware deliverables included in an arrangement that contains software that is more than incidental to the products or services as a whole are included within the scope of sop 972.
Aicpa revenue recognition task forces are charged with developing revenue recognition implementation issues that will provide helpful hints and illustrative. Tackling the systems side of the new revenue recognition. The guidance is already in effect for public companies. In may 2014, the aicpas future of learning task force announced four broad recommendations to positively impact the future of learning for the cpa profession. Mar 22, 2016 the aicpa has also created a revenue recognition working group, and task forces are studying specific implementation issues unique to 16 industries, including software. A related subissue involves a situation where the customer, due to a lack of certain essential hardware parts, asks the vendor to delay delivery of the software. Revenue recognition on software arrangements appendix c of sop 972 110 glossary from sop 972 1. Update on revenue recognition issues affecting software. Timeshare entities revenue recognition task force aicpa.