In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”). The purpose of the new guidance was to provide a comprehensive, industry-neutral revenue recognition model intended to increase financial statement comparability across companies and industries. It is replacing industry and transactional specific guidance that could result in different accounting for economically similar transactions.
The core principle of Topic 606 requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The new standard will affect almost all companies to some extent and the significance of the change will vary depending on industry and current accounting practices. There are a couple of carve outs for industries that are within other standards such as leases, insurance and financial instruments.
Some companies and industries will see very little change in the way that revenue is recognized in their financial statements under the new standard. One industry that will see significant change is the construction industry. The effort to identify potential changes and transition to the new guidance will likely take more time and resources than most companies would typically expect – and certainly more than most accounting standards issued in recent memory.
Please use the links below to access a 2-part recorded webinar series that describes how this new standard will affect your construction company. As a side note, when you click the link to watch the video, it will ask for a name and email address. I promise you, we will not start bombarding you with emails and calls. It's just a requirement of the service we used to prepare the recordings.
The New Revenue Recognition Standard - Part 1
The New Revenue Recognition Standard - Part 2
Should you have any questions about the new revenue recognition standard and how it affects your surety program, please reach out to your local branch - we'd be happy to assist.
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