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Phyllis Harden

Legislative & Special Projects, Pine Bluff Sand & Gravel
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New FASB Revenue Recognition Accounting Standard Affects on Contractors

New FASB Revenue Recognition Accounting Standard Affects on Contractors

On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) released the final Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (link is external)to create a single revenue recognition standard across multiple industries, including construction. The new five-step model, which will converge U.S. GAAP and IFRS and apply to all industries and transactions, will have a profound effect on how A/E/C firms must update and comply with new revenue standards. More information on the standard is contained within the FASB in Focus(link is external) or can be viewed in a three part video series(link is external).

AGC members have been engaged since 2008, when FASB released the Discussion Paper on Preliminary Views on Revenue Recognition. In 2010, AGC submitted comments to FASB in response to the Exposure Draft outlining concerns of the construction industry and key discussion points for the Board to consider. In recent years, members of the AGC Financial Issues Forum have meticulously articulated the industry's position to FASB.

This standard has the potential to affect every company's day-to-day accounting and, possibly, the way business is executed through contracts with customers; as such, existing terms and strategies could take on new meaning under the new standard. It is critical that your company begin to take the proactive steps to be prepared as the new standard will affect accounting and financial reporting, tax implications, and the need for updating technology and internal systems. While the effective date may seem far off, proper preparation is essential. Revenue recognition is a critical and often complex accounting area. Executives and management want to know what to expect, so get started now.

For More Information:

If you need help in getting up to speed on this topic or would like to hear a refresher on how the standard is expected to apply to the construction industry, please go to the AGC Webinar or the Construction Financial Management Association (CFMA) knowledgenow Webinar(link is external) for an archived version of our associations' revenue recognition webinars.

AGC, in conjunction with the CFMA, prepared the following summary of key discussion points and a sample letter throughout the process of engaging with FASB. Still more information, including links to FASB's revenue recognition proposal and previous comment letters can be found here.

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