Financial board updates revenue recognition standard
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which replaced most of the existing guidance with an overriding principle and five-step model. Companies now are instructed to identify contracts with customers; identify performance obligations; determine transaction prices; allocate transaction prices; and recognize revenue.
The updated standard allows revenue to be recognized over time if the following criteria are met:
Roofing contractors should perform general analyses of their contracts to evaluate whether they meet the criteria to recognize revenue over time. If one or more of the criteria are not met, the revenue will be recognized at the time the performance obligation is completed.