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Interpretive Guidance Updated for Revenue Recognition

New interpretive guidance is available regarding revenue recognition. On August 18, the Securities and Exchange Commission (“SEC”) issued Release No. 33-10402, Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements, which advises public companies to abandon the guidance for bill-and-hold transactions under Accounting and Auditing Enforcement Release (“AAER”) No. 108, In the Matter of Stewart Parness, once they start applying Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers. Until then, companies should continue using guidance under AAER No. 108.

Another interpretive release issued was Release No. 33-10403, Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. Release No. 33-10403 advises companies to continue applying the interpretive guidance in Release No. 33-8642, Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile, until ASC 606 is adopted.

In related news, the SEC issued Staff Accounting Bulletin (“SAB”) No. 116, which modifies part of the existing revenue recognition guidance in the agency’s Staff Accounting Bulletins to reflect ASC 606. The SEC said SAB No. 116 applies upon the adoption of ASC 606. Until then, the guidance under SAB No. 116 asks registrants to continue using previous staff guidance on revenue recognition.

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