Time to Comply with ASC 606 Revenue Recognition Changes
The FASB Accounting Standards Codification® (ASC) Topic 606 (aka ASC 606), Revenue from Contracts with Customers, may require your company to change the way you bill for contract deliveries and recognize revenue when doing work for your customers.
Timing is a critical part of revenue recognition under the new guidance, especially if it revolves around certain milestones or deliverables occurring. As such, you may need to change the way you collect employee time data to capture billable work in a way that complies with ASC 606:
The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
FASB ASC 606-10-05-3 through 05-4 and 606-10-10-2 through 10-4
Setting up your employee timesheets to capture the new work breakdown structure for revenue recognition makes it easier for you to track real-time progress, bill as work is completed (e.g., “when customer value is delivered”) and recognize revenue in a timely manner. In addition, the work that is tracked on timesheets serves as an audit artifact in support of milestone completion.
Example: Acme Construction
A construction company (we’ll call it “Acme Construction”) provides a good example of the types of changes to previous billing and revenue recognition models that may be required to comply with ASC 606. Prior to ASC 606, Acme Construction would bill for work on a construction project based on the type of resources needed to complete a job. So, for example, all tasks carried out by electricians were billed when electricians had completed the first part of the project under an invoice for electrical work. The same applied to plumbing, and so on.
However, the various electrical tasks were worked and completed at different times throughout the building project. ASC 606 requires Acme Construction to recognize revenue for these tasks as each one relates to milestones for delivering customer value. So, they need to change the way they invoice customers to reflect the new process.
How Journyx Helps with ASC 606 Compliance
Journyx provides the tools to build the contract work breakdown structure that matches up with ASC 606 revenue recognition requirements. Employees are then able to track their work progress based on the contract milestones for delivering value to the customers. Real-time data is captured on timesheets and can be used to monitor delivery dates and completion of revenue recognition milestones. Contract managers can track what work is outstanding to complete a milestone. They are also notified when work is complete and ready for approval, so that it can move on to accounting and finance for invoicing and financial reporting. In a nutshell, Journyx allows you to track time the right way and push that time into invoices and financial reports quickly.
Discover how Journyx can help your organization capture and process employee time and expenses quickly and easily – in a way that helps you comply with a variety of regulations.
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Journyx helps you track time for projects, payroll, and more. Learn how Journyx can help you use time to your advantage in your business.