Some older SEC interpretive guidance for revenue standard is dropped from U.S. GAAP

The FASB on Nov. 22, 2017, published Accounting Standards Update (ASU) No. 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release No. 33-10403, to reflect SEC guidance that deals with some limited aspects of the FASB’s landmark revenue recognition standard.

The update to U.S. GAAP deletes specialized guidance the SEC has released over the years to address specific revenue recognition questions. The SEC published these changes in August with Release No. 33-10402, Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements, which states that public companies should no longer follow the guidance for bill-and-hold transactions in Accounting and Auditing Enforcement Release (AAER) No. 108, In the Matter of Stewart Parness, once they adopt the FASB’s Topic 606, Revenue From Contracts With Customers. In a bill-and-hold transaction, the seller can recognize the revenue from the sale before delivering the goods to the customer.

Also in August the SEC published Release No. 33-10403, Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement Into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. The update said companies should continue to refer to the interpretive guidance from December 2005, Release No. 33-8642, Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile, until they adopt the new revenue standard.

In addition, the SEC published Staff Accounting Bulletin (SAB) No. 116 to modify some of the existing guidance for revenue recognition in its series of Staff Accounting Bulletins so it matches Topic 606.

According to SAB No. 116, the guidance in SAB Topic 13, Revenue Recognition, and SAB Topic 8, Retail Companies, will no longer be applicable once a company adopts the revenue standard.

The SEC also revised Section A, Operating-Differential Subsidies of SAB Topic 11, Miscellaneous Disclosure, to clarify that the revenue from the operating-differential subsidies presented under a revenue caption should be presented separately from the contract revenue reported according to the new revenue standard.

The FASB in May 2014 published sweeping new requirements for companies and other organizations to record the top line in their income statements via ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606). The standard goes into effect for public companies in 2018. Private companies and other organizations have an extra year to comply with it.

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