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Revenue Recognition Draft Guidance Issued for Utilities and Time-Share Companies

The American Institute of Certified Public Accountants’ Financial Reporting Executive Committee has issued the following working drafts to address implementation of Accounting Standards Update No. 2016-09, Revenue From Contracts With Customers, by the Financial Accounting Standards Board (“FASB”):

  • Working Draft: Proposed Implementation Issues for Revenue Recognition: Power & Utility Entities (#13-1): Accounting for Tariff Sales to Regulated Customers. Intended to help power and utility companies with applying ASU No. 2016-09 to revenues caused by regulated utility tariffs, this working draft explains that agreements between utilities and customers for services provided under a regulated tariff must be disclosed as a customer contract. Additionally, the working draft states that additional fees imposed under alternative revenue programs that allow utilities to recover extra costs are not covered by Topic 606.
  • Working Draft: Proposed Implementation Issues for Revenue Recognition: Time-Share (#16-6): Recognition of Revenue—Management Fees. Intended to help time-share managers provide management and operating services to ownership companies, this working draft explains how the customer contract should be identified when time-share managers and ownership companies have more than one contract. Furthermore, the working draft cites FASB Accounting Standards Codification (“ASC”) 606-10-25-14 and FASB ASC 606-10-25-15, Revenue — Revenue From Contracts With Customers — Overall — Recognition — Identifying Performance Obligations, as guidance for recognizing goods or services that are associated with a customer relationship. Also included in the draft is a discussion on the guidance under Topic 606 regarding customer relationships with time-share managers.

Both working drafts are available for comment through May 1.

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