With Saltmarsh S.A.F.E. you can easily and securely transfer data directly to your Saltmarsh accountant.

Saltmarsh BRIDGE is a service that allows you to have instant access to your own QuickBooks virtual desktop already installed and ready to use.

Saltmarsh R & D tax credit software login

Featured Video

CPA - Featured Video - Qualifying for the Research and Development Tax Credit

Qualifying for the Research and Development Tax Credit

The R&D tax credit is a Federal incentive provided by Congress to U.S. Manufacturers to offset the cost of innovating. As it is a credit as opposed to a deduction, it is a dollar for dollar offset to your tax liability. Also, since the credit is open for the 3 immediately preceding tax years, filing a claim for refund for the credit for past years can be a direct cash infusion into your company. This video explains the tax credit and how Saltmarsh can help your business claim the credits you deserve.

Featured News & Articles

New Revenue Recognition Standard: Manageable Changes for Long-Term Contracts Posted -Monday, February 02, 2015

Within the next couple years, construction companies will be required to follow a new revenue reporting standard. This article discusses the challenges and ways to adapt to the new requirements.

» Read More

Saltmarsh Financial Advisors Hosts Series Of Educational Events Featuring Dr. Apollo Lupescu Posted -Friday, January 16, 2015

We were honored to sponsor Apollo D. Lupescu, PhD of Dimensional Fund Advisors (DFA) as a guest speaker for various Saltmarsh Financial Advisor events.

» Read More

Kristen Stogniew, Esq., AAP to Speak at Information Interchange Conference Posted -Tuesday, January 06, 2015

Kristen Stogniew, Esq., AAP, will be speaking at Information Interchange Conference. The event will be held in Orlando, Florida on February 24-26, 2015.

» Read More

Featured Blog Posts

Team Saltmarsh at the Color Vibe 5K Posted - Monday, March 02, 2015

Dodd Frank Act Integrated Mortgage Disclosures Meeting - Tampa, Florida Posted - Monday, February 23, 2015

Five Painless Ways to Achieve Financial Security Posted - Monday, February 23, 2015

Saltmarsh News & Articles Top stories from Saltmarsh's Pensacola, Fort Walton Beach, Tampa, and Orlando offices

New Revenue Recognition Standard: Manageable Changes for Long-Term Contracts

Release Date: Monday, February 02, 2015

-This excerpt is from our Winter 2015 Dimensions Newsletter-

For six years now, construction industry leaders and accounting professionals have been nervously following the progress of a new revenue reporting standard that was being developed by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The new standard had the potential to fundamentally change the way construction companies recognize and report revenue on long-term contracts under U.S. generally accepted accounting principles (GAAP).

After several rounds of exposure drafts and public comments, the final version of the new standard was released earlier this year. Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), represents a major accounting change, but the effects appear to be less tumultuous than originally feared.

Although the effective date is still several years away, any contractor that is required to complete a GAAP-compliant financial statement for investors, lenders or sureties should begin thinking about how to adapt its accounting practices to comply.

Percentage-of-Completion and Cost-to-Cost
ASU 2014-09 reflects a shift from what’s known as “rules-based” accounting to a “principles-based” system. There are still rules, of course, New Revenue Recognition Standard Manageable Changes for Long-Term Contracts Government Contracts and FAR How to Improve Your Forecasting but much of the detailed, industry-specific revenue recognition guidance that construction firms have traditionally relied on is replaced by a set of broad objectives that are designed to ensure good reporting.

Contrary to earlier fears, it now appears most contractors will still be able to use the percentage-of-completion method for recording revenue from long-term contracts. Some of the terminology and technical procedures may be different but, generally speaking, this widely used method will still be permitted.

The final standard also clarifies that most companies can continue using a cost-to-cost approach — calculating the percentage of completion based on the percentage of projected costs that have been incurred. Originally, the proposed standard recommended using an output method that measures the units produced, instead of cost-to-cost. However, it now appears that, with certain exceptions, percentage-of-completion using cost-to-cost will still be allowed.

Performance Obligations 
One area of great concern was the proposed requirement that long-term contracts be broken down into a series of smaller, separate “performance obligations.” It originally appeared that contractors would need to allocate the appropriate portion of the total contract price, costs to date, and total anticipated costs to each performance obligation.

This posed particular difficulties in design-build contracts, where services are bundled and integrated rather than segmented. It could also complicate common accounting industry practices such as performance bonuses, change orders and post-completion warranty work. 
The final standard, however, specifically states that all contracts do not necessarily have to include multiple performance obligations. Performance obligations may be bundled when multiple goods or services are highly interrelated, or when a contractor provides a significant service by integrating multiple goods and services into one combined item. You will need to evaluate each contract to identify whether separate performance obligations exist, and document your conclusions.

Challenges Remain
Although the final standard is less revolutionary than originally feared, contractors still face some fundamental challenges. For example, the new standard removes certain categories of costs from the revenue recognition calculation, and other costs must now be allocated differently. The new standard will also require significant changes to footnote disclosures. Most contractors’ contract and job cost reporting systems will need some modifications to accommodate these changes.

The new standard goes into effect for publicly traded companies for the first annual reporting period beginning after December 15, 2016. Nonpublic companies may elect to wait until the first annual reporting period after December 15, 2017. For contracts that span these deadlines, contractors can choose from several options for handling the transition.

The earliest deadline is only two years away, so now is the time to start thinking about the changeover — and how you will adapt your accounting practices to comply with the new standard.



Please feel free to contact us to discuss how your company can prepare for these upcoming changes.

Featured Video View all CPA Videos

Qualifying for the Research and Development Tax Credit

The R&D tax credit is a Federal incentive provided by Congress to U.S. Manufacturers to offset the cost of innovating. As it is a credit as opposed to a deduction, it is a dollar for dollar offset to your tax liability. Also, since the credit is open for the 3 immediately preceding tax years, filing a claim for refund for the credit for past years can be a direct cash infusion into your company. This video explains the tax credit and how Saltmarsh can help your business claim the credits you deserve.

Archived News View all CPA News & articles

More News...

Follow our feeds.

Pensacola CPA on Facebook Pensacola CPA on LinkedIn Pensacola CPA RSS Feed Pensacola CPA on Twitter See What We Like with Pinterest Pensacola CPA on YouTube

Areas of Expertise

Locations

Pensacola
CPA and Bank Consultants - Pensacola, FL 900 N. 12th Avenue, Pensacola, FL 32501
Local Phone: 850.435.8300 • Fax: 850.435.8352
Fort Walton Beach
CPA and Bank Consultants - Fort Walton Beach, FL 34 Walter Martin Rd, Ft Walton Bch, FL 32549
Local Phone: 850.243.6713 • Fax: 850.243.4137
Tampa
CPA and Bank Consultants - Tampa, FL 201 N. Franklin St., Ste 2720, Tampa, FL 33602
Local Phone: 813.287.1111 • Fax: 813.207.0201
Orlando
4798 New Broad Street, Ste 320, Orlando, Florida 32814
Local Phone: 407.203.8990 • Fax: 407.203.8987

Resources

Quick Downloads

Toll Free: (800) 477-7458 • Email: info@saltmarshcpa.com

Website by Grendelfly Studio - A Division of SC&G

(c) 2015 Saltmarsh, Cleaveland & Gund • Certified Public Accountants And Consultants • Serving Florida And The Southeast