The FASB’s much-anticipated final standard on revenue recognition has been issued. FASB Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers: Topic 606, is the culmination of a joint project with the IASB which simultaneously issued IFRS 15, Revenue from Contracts with Customers. The issuance of these documents completes the joint effort by the FASB and the IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and IFRS. The new revenue recognition guidance affects all entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or leasing contracts). This ASU will supersede the current revenue recognition requirements found in Topic 605, Revenue Recognition, and does away with most industry-specific guidance that has been developed over several decades.

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The FASB’s much-anticipated final standard on
revenue recognition has been issued. FASB
Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers: Topic 606,
is the culmination of a joint project with the IASB
which simultaneously issued IFRS 15, Revenue from
Contracts with Customers. The issuance of these
documents completes the joint effort by the FASB and
the IASB to improve financial reporting by creating
common revenue recognition guidance for U.S. GAAP
and IFRS.
The new revenue recognition guidance affects all
entities that either enter into contracts with customers
to transfer goods or services or enter into contracts
for the transfer of nonfinancial assets unless those
contracts are within the scope of other standards
(e.g., insurance contracts or leasing contracts). This
ASU will supersede the current revenue recognition
requirementsfoundinTopic605,RevenueRecognition,
and does away with most industry-specific guidance
that has been developed over several decades.
June 2014
Final Revenue Recognition Standards Issued
Core Principal Steps
The final guidance provides an underlying core
principle that states an entity should recognize
revenue to depict the transfer of promised goods
or services to customers in an amount that reflects
the consideration to which the entity expects to be
entitled in exchange for those goods or services. To
achieve that core principle, an entity should apply the
following steps:
• Step 1: Identify the contract(s) with a customer.
• Step 2: Identify the performance obligations in
the contract.
• Step 3: Determine the transaction price.
• Step 4: Allocate the transaction price to the
performance obligations in the contract.
• Step 5: Recognize revenue when (or as) the
entity satisfies a performance obligation.
Effective Dates
For publicly traded entities, the guidance is effective
for annual reporting periods beginning after December
15, 2016, including interim periods within that reporting
period. Early application is not permitted.
For all other entities (nonpublic entities), the guidance
is effective for annual reporting periods beginning
after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018.

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
A nonpublic entity may elect to apply this guidance
earlier, based on one of the following:
• An annual reporting period beginning after
December 15, 2016, including interim periods
within that reporting period (public entity effective
date);
• An annual reporting period beginning after
December 15, 2016, and interim periods within
annual periods beginning after December 15,
2017; or
• An annual reporting period beginning after
December 15, 2017, including interim periods
within that reporting period.
More Details to Come
MHM will provide further analysis of ASU No. 2014-
09, Revenue from Contracts with Customers, in the
near future including our Executive Education Series
Webinar on June 12, 2014: Is Your Company Ready
for the New Revenue Recognition Standard?
If you have any specific questions, comments or
concerns, please share them with James Comito
of MHM’s Professional Standards Group or your
MHM service professional. You can reach James at
jcomito@cbiz.com or 858.795.2029.