Revenue Recognition Draft Guidance Issued for Utilities and Time-Share Companies

March 6, 2017

By Brynn McNeil

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.