The new revenue recognition standard, Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) is the first major principles-based standard that will require substantially more management judgment, supporting documentation and disclosure than previous strict criteria-based guidance. In some cases, companies may reach different conclusions on seemingly similar transactions, based on a company’s specific facts and circumstances. SEC comment letters on early adopters have focused on determination of single versus multiple performance obligations, especially management’s judgments, licensing arrangements, level of disaggregation and inconsistencies in the totality of company disseminated information.
This report focuses on those items in the new model that will have the greatest effect on energy companies and includes all subsequent amendments, Transition Resource Group (TRG) clarifications, finalized and exposed guidance from the American Institute of CPAs revenue recognition oil and gas (O&G) task force, and SEC views gathered from official speeches. The SEC previously announced it expects registrants to reflect TRG decisions as they implement the new guidance—any differences in accounting would need to be discussed with SEC staff.