REVENUE RECOGNITION ACCOUNTING: UNDERSTANDING THE IMPACT OF ASC 606

Brent McCallum and Chloe McCallum

Review of Business and Finance Studies, 2022, vol. 13, issue 1, 31-45

Abstract: This case contrasts revenue recognition accounting under the previous standard, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605, and the subsequent guidance (ASC 606). This case is appropriate for undergraduate or graduate business courses focusing on corporate financial reporting. Accounting and finance professionals will find the case beneficial in understanding the application of the new pronouncement to common revenue recognition issues. Utilizing a putative Audit Partner who is auditing the environmental controls division of a manufacturing company, the case requires the procurement of information related to recently implemented revenue recognition accounting standards. The case employs a series of questions to ensure student comprehension of a variety of aspects of accounting for revenue recognition under the new standards, and the preparation of journal entries for fact patterns related to many typical transactions entered into by the auditee company (e.g. recognition of discounts.) The case makes extensive use of the FASB ASC references and guidance from the global professional accounting firms. Students should plan to spend 5-10 hours outside of class addressing the case requirements; in-class discussion of the case will run approximately 2 hours. Students may also present their findings in class for feedback and debate.

Keywords: Revenue Recognition Accounting; Accounting Standards Codification (ASC) 606; International Financial Reporting Standards (IFRS) 15; International Accounting Standards Board (IASB); Financial Accounting Standards Board (FASB); Manufacturing Industry (search for similar items in EconPapers)
JEL-codes: M41 M42 (search for similar items in EconPapers)
Date: 2022
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