Get ready for the new revenue recognition standard

Description

Abstract: Currently, revenue recognition rules are scattered over disparate sections of the Accounting Standards Codification. Many of these rules apply to specific industries or transaction types, creating inconsistent accounting treatments for economically similar transactions. But the Financial Accounting Standards Board has issued a new standard that replaces these rules with a single, principle-based revenue recognition framework. This article discusses the five steps necessary for entities to put the “core principle” of revenue recognition into action. It also discusses identification of performance obligations and the timing of revenue recognition. A sidebar lists five steps an entity needs to take to determine when revenue should be recognized under the new standard.