In January 2020, the Financial Accounting Standards Board (FASB) released a 191-page document called Revenue Recognition Implementation Q&As. The Q&As are compiled mostly from FASB and Transition Resource Group (TRG) memos, but they also include information from other educational resources made available during implementation of Accounting Standards Codification (ASC) 606. Although the 81 Q&As are not considered authoritative, the Securities and Exchange Commission (SEC) has previously elevated TRG discussions to a near-authoritative level (see the RevenueHub article SEC Makes TRG Discussions Authoritative).
Objective of Q&As
FASB and TRG memos were previously released on an ad hoc basis as various implementation questions were resolved. These memos often addressed the same issue multiple times as financial statement preparers requested additional clarification, which made it difficult for entities to quickly identify the correct answer to their implementation question. The Q&As solve this problem by consolidating implementation resources into one document, sorting implementation issues by subject matter, and eliminating redundant material.
The FASB clarified that the Q&As were released only to improve the ease of navigating resources that were already available to the public. They do not contain new implementation guidance, nor do they contain guidance that was later made authoritative via inclusion in ASC 606.
Contents of Q&As
The Q&As have been arranged by topic, as follows:
| Topic | Number of Questions |
|---|---|
| Scope | 6 |
| Step 1 – Identify the Contract | 5 |
| Step 2 – Identify the Performance Obligation | 13 |
| Step 3 – Determine the Transaction Price | 19 |
| Step 4 – Allocate the Price to the Performance Obligations | 2 |
| Step 5 – Recognize Revenue | 12 |
| Licensing | 3 |
| Presentation | 3 |
| Contract Costs | 17 |
| Other | 1 |
| Total | 81 |
Conclusion
ASC 606 introduced a more principles-based approach to revenue recognition. Unsurprisingly, this new approach brought with it a host of implementation questions from financial statement preparers and issuers. In response, the FASB established the TRG and provided educational resources to resolve questions and concerns. Although not authoritative in the same sense as ASC 606, these resources continue to aid entities in implementing ASC 606. With the publication of the Revenue Recognition Implementation Q&As, the FASB consolidated these resources into a single document that entities will find much easier to navigate moving forward.
