Article
Revenue recognition implementation: Key nuances for agribusiness companies
Jan. 26, 2020 · Updated Oct. 28, 2020 · Authored by K-deep Dhaliwal
While the intent of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers is to provide a uniformed framework for revenue recognition — regardless of business type or industry — there are certain nuances that agribusiness companies must consider.
If your company hasn’t yet begun implementing the changes to revenue recognition, now is the time to start; the new standard fundamentally changes how companies across nearly every industry should recognize revenue.
In short, the new revenue recognition standard helps eliminate inconsistencies in how businesses across industries account for similar revenue transactions by providing a comprehensive revenue recognition model that applies to a wide range of industries.
Here’s what you need to know for your agribusiness company.
Implications for agribusiness companies
Depending on the point of the agribusiness supply chain, agribusiness companies may consist of:
- Growing operations
- Packing, cooling, and storage facilities
- Marketing entities
- Vertically integrated operations with each of these components
Regardless of the type of agribusiness company, the five-step revenue accounting process must be applied to recognize revenue.
How to get started
There are four steps to help get you started.
- Review the revisions, including a new five-step revenue accounting process.
- Analyze your agreements by performing a thorough analysis of all contracts with your customers according to certain conditions.
- Apply the five-step process.
- Disclose revenue, both qualitative and quantitative. To learn more about the additional revenue disclosures, read our article.
Application approach
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.