Best bites: October government contracting lunch & learn highlights
On Oct. 22 and 23, CohnReznick’s Government Contracting practice presented “Revenue Recognition: A Government Contractor's Guide” as the October installment of the Lunch & Learn series. If you missed the event, or want a recap, read on for the top insights discussed.
The effective dates for ASC 606 – Revenue from Contracts with Customers standards are now upon us. CohnReznick’s October Lunch & Learn events covered how the new guidance will affect government contractors’ revenue recognition policies and disclosures, how to develop an implementation plan, and strategies for completing that implementation plan in time for the first reporting period. Read on for nine top insights from the events:
3 common misconceptions about revenue recognition by government contractors
- I have only time and materials and firm fixed-price contracts, so the new standard won’t affect me.
- I can wait until January or February and my auditors can help me calculate any revenue changes.
- The government spells out my performance obligations by contract line item number, so I just follow the contract under the new standards.
3 keys to successful implementation
The standard brings accounting, finance, project controls, and contracts together, and each has responsibility for revenue recognition.
- Bring these departments together early in the bid phase all the way through award and modifications to make sure all parties understand the contract.
- Use must-have tools and checklists modified for your company to streamline decision-making and documentation of conclusions on approaches. Make sure your policies are updated.
- Disclosures can be burdensome in the year of adoption. Save some brainpower to get to the finish line.
3 areas of revenue recognition that are tripping up government contractors the most
- Software sales and agile development. Get essential guidance on IP licensing.
- Distinct vs. interrelated performance obligations. Contractors are finding that what was once assumed to be one performance obligation may not be under the new standard, and you may not want it to be!
- Principle vs. Agent relationship. Guidance is different under the new standard and may create more opportunity for netting revenue. This may have an impact on size standard calculations.
Revenue recognition is a complex topic for government contractors, and ignoring it will only cause increased audit costs, scrutiny, and additional time at year end.
InsightAvoiding common incurred cost proposal (ICP) submission inadequaciesGovernment contractors operating on a December 31, 2020 fiscal year end (FYE) need to complete and submit FY 2020 ICPs in accordance with the six month post-FYE deadline in FAR Clause 52.216-7, Allowable Cost and Payment.
InsightBusiness of Construction – March 2021CohnReznick will be featuring several topics important to the construction industry in a series of listen-in-style conversations, webinars, best-practice insights, and other helpful tools.
InsightEmerging risk area for government contractors: Labor category job qualifications in time and materials contractsJeffrey WittGovCons may face false claims assertions if an audit finds inadequate support for labor category qualifications in T&M billings. Learn more.
InsightContribute to the 2021 GAUGE surveyCohnReznick and Unanet invite you to take part in our fifth annual benchmarking survey for government contractors and other organizations that do business with the federal government.