Judgment Calls Stalk Revenue Recognition
Dec 01, 2017
On December 1, 2017, CFO.com released an article on how the new revenue recognition standard involves exercising a lot of professional judgment and that continues to be a challenge, according to an AICPA official.
In the article, they discuss how one of the issues involves having to identify revenue when it includes “variable considerations.” Such as refunds, performance bonuses, discounts, and rebates. Corporate accountants will now have to figure out how to report variable considerations as they exist from day one of a contract. Variable consideration is something companies didn’t have to deal with previously” except under a small number of very specific circumstances.
Another challenge for preparers is that they now have to judge whether to recognize “a significant financing component” in their sales contracts and, if so, how much to recognize. In such cases, the customer pays a considerable sum before the provider fulfills the contract.
Review the full article on CFO.com's website.
