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Revenue Recognition

Operationalizing the proposed revenue recognition requirements

In 2011, the Financial Accounting Standards Board (FASB) issued their latest revised exposure draft (ED), Revenue from Contracts with Customers. The revised ED provides companies with a single model to use in accounting for revenue arising from contracts with customers and could superseded current recognition guidance, including industry-specific guidance. A final standard is expected in the first half of 2014.

The FASB has publicly noted that the proposed effective date for the final revenue recognition standard for public companies would be reporting periods beginning after December 15, 2016. Early adoption is not permitted. The proposed transition guidance would permit companies to either apply the proposed requirements retrospectively to prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The delayed effective date and transition approach is meant to allow companies a reasonable timeframe to comply.

Considerations and challenges

The proposals in the ED will present complexity for companies in various industries. Examples of some of the challenges are:

  • Bundled goods and services
  • Transaction price calculations
  • Contract considerations
  • Capitalization of costs to acquire customer contracts
  • Disclosures
  • Tax

Organizations may need to consider other project needs, including:

  • Implementation of updated or new systems, processes and controls, where required
  • Effective training and communication of new requirements
  • Effective program and resource management related to this effort

Getting started

Some effective first steps to consider as you begin to evaluate the implications of the potential new standard may include evaluating significant revenue streams and key contracts to identify the specific revenue recognition changes required and the specific business units where these changes may have the greatest impact; addressing the longer lead-time areas where new calculation engines or revised allocation processes may be required; and establishing a granular project plan and roadmap to manage the effort across multiple business unites and countries.

As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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