Revenue Standard Working Drafts Released for Insurers & Software Companies
Two working drafts addressing implementation problems with the Financial Accounting Standards Board’s (“FASB”) revenue recognition standard have been issued by the American Institute of Certified Public Accountants’ (“AICPA”) Financial Reporting Executive Committee:
- Proposed Implementation Issues for Revenue Recognition: Insurance Entities (#9-1): Considerations for Applying the Scope Exception in FASB ASC 606-10-15-2 and 606-10-15-4 to Contracts Within the Scope of ASC 944. This working draft explains that contracts bound by the financial reporting requirements under FASB Accounting Standards Codification (“ASC”) 944, Financial Services – Insurance, are not impacted by FASB ASC 606, Revenue From Contracts With Customers.
- Proposed Implementation Issues for Revenue Recognition: Software (#14-7): Significant Financing Components in Software Arrangements. This working draft offers guidance for the measurement requirements under ASC 606-10-32, Revenue From Contracts With Customers — Overall — Measurement, when a software contract features a financing component. The draft mentions the explanation in paragraph BC234 of the Basis for Conclusions for ASU No. 2014-09 regarding the importance of the financing component.
Comments on the working drafts are due Monday, April 3. If finalized, the draft guidance will be added to the AICPA’s next edition of the Audit and Accounting Guide: Revenue Recognition.
If you need assistance with the implementation of the FASB revenue recognition standard, reach out to one of our experienced professionals.