New Revenue Recognition Rules Arriving Soon

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Ryan Fletcher, CPA, of UHY LLP discusses the new revenue recognition rules that are arriving soon.

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The Financial Accounting Standards Board and the International Accounting Standards Board are developing a converged standard regarding revenue recognition that is expected to have an effect on all entities that adhere to US GAAP or IFRS. The standard is expected to be released in the first quarter of 2014.

The new standard can have a significant impact on the way that companies recognize and record revenue. The following are some of the important changes and hurdles that companies will face under the new standard:

New criteria for contract determination
Under the new standard, contracts and agreements must contain commercial substance (cash flows between the companies should be expected as a result of the arrangement), a commitment to perform obligations from both parties, and the identification of rights and responsibilities (including payment terms).

Updated disclosures
Disclosures regarding revenue recognition will need to include explanations for changes in balances, information about performance obligations, and identification of judgments made in the application of revenue recognition. Companies will also need to disclose the determination of the transaction price and the allocation to various performance obligations.

Disaggregation of performance obligations
Companies will be required to identify various components of a contract, specifically long-term contracts, and apply separate patterns of revenue recognition for those components, if considered necessary. For example, a software company would need to consider recognizing revenue on the software licensing component of a contract separately from the software upgrades included in the contract.


UHY LLP, a licensed CPA firm, provides audit and other attest services to public and private companies. UHY Advisors provides tax and consulting services to a variety of sectors. UHY Advisors FLVS provides forensic, valuation, intellectual property, electronic discovery and international arbitration services to law firms and their clients. Many of these services grew from client business needs and their requests for assistance in a variety of areas of expertise.

UHY LLP, operating in an alternative practice structure with UHY Advisors, forms one of the largest professional services firms in the US. While that scale might provide confidence for some clients, others tell us our greatest value is the way we bring these resources to bear to help address today’s evolving business challenges. It’s a philosophy we call “The Next Level of Service”. To learn more visit

All of the above entities are members of UHY International, a global network of independent professional services firms that provide audit, tax and consulting services around the world. UHY International member firms comprise one of the top international accounting networks in the world. As a member firm, we provide our clients with resources in business centers strategically located around the globe. We are an active member in this organization with significant participation that brings the power of an international network to bear for our clients.

UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.” UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

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Jessica Bollenberg
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