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Technical side of revenue recognition still vexes companies

Tammy Whitehouse | January 10, 2017

In the continuing march to new accounting for how to recognize revenue in financial statements, some companies with complex transactions find they are still wrestling with how to apply the technical requirements.

The new five-step method for recognizing revenue that all public companies will apply beginning in 2018 requires companies to begin by identifying their contracts with customers. Then within each contract, companies must identify the individual performance obligations and allocate the purchase price to each of the distinct performance obligations. Revenue is recognized in financial statements as the company delivers on each of its distinct performance obligations.

The new model doesn’t produce much change in the pattern of recognition for companies that have relatively straightforward transactions with their customers. But in sectors like... To get the full story, subscribe now.