For 2019, there is a new accounting standard (ASC 606) that Baldwin will be implementing that relates to how revenue is recognized. This standard is especially relevant to contractors.
As part of this new standard, each contract will have to be evaluated according to 5 core principles in order to determine the proper recognition of revenue. These principles are as follows:
- Identify the contract
- Identify separate performance obligations (some contracts may need to be broken down into multiple obligations (phases) for revenue and cost tracking)
- Determine the transaction price
- Allocate the transaction price to performance obligations
- Recognize revenue when each performance obligation is satisfied
In order to assist you in this endeavor, we have created a spreadsheet that will need to be used to analyze each contract in progress at the end of both 2018 and 2019.
We’ve tried to make this as simple as possible, but we realize that this is a major change to your accounting policies. We will be glad to assist you, if needed, in filling out these schedules and helping you determine the proper recognition of revenue on your projects.