You know your business is unique. Depending on what you offer, what industry you focus on, and even where you’re located, you’re bringing some type of unique value to your clients. The way you manage your accounting can also be very different than other businesses. Some industries have certain ways of managing contracts while others take an entirely different approach.
ASC 606, the revenue recognition update from the FASB entitled Revenue from Contracts with Customers, affects most every business dealing with contracts in some way. The main objective for this update is to establish guidelines and principles that improve the comparability of financial statements across industries. The modifications to statements will help ensure companies and stakeholders are on the same page in terms of the nature of a contract, timing, and uncertainty of revenue from contracts with customers.
That said, there are a few industries that will have to make more modifications than others, whether it be the timing of their services or the nature of their products. Telecommunications, aerospace, construction, asset management, real estate, and software industries should pay special attention to the new guidance and the documents that FASB continues to publish as we get closer to the date the update goes into effect. For example, contractors will need to disclose both quantitative and qualitative information in their financial statements when the services are rendered or upon completion of service.
There is a lot of information out there today about ASC 606, and a lot of it can make you go cross-eyed if you let it. Ultimately, this update may call for more detail in your financial statements so that everyone is better informed. You as a company need to communicate appropriately to your stakeholders, and stakeholders need to do the same. Tracking more detail can cause some headaches, but is well worth it in the long run.
No matter your industry, BTerrell group is making it a priority to understand ASC 606, Revenue from Contracts with Customers, from A to Z. Leave the fine print, financial jargon, and industry reports to us and give us a call if you have any questions.
By BTerrell Group, Texas- based Intacct Partner
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