Revenue recognition in the life sciences industry
In 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) to provide a robust framework and comprehensive principles for addressing revenue recognition issues. Additionally, the guidance on accounting for certain costs related to a contract with a customer in the scope of Topic 606 was codified in ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers.
Our white paper, Revenue recognition in the life sciences industry, highlights aspects of the guidance that are particularly pertinent for entities in the life sciences industry, including:
- Determining whether collaboration agreements are in the scope of the ASC 6006
- Identifying the units of account
- Measuring and recognizing variable consideration
- Allocating the arrangement consideration or transaction price to the units of account
- Determining whether revenue should be recognized over time or at a point in time
- Accounting for licenses of and rights to use intellectual property
- Accounting for sales involving distributors
- Accounting for contract manufacturing and contract research services
For additional information about all of the revenue recognition guidance, including those aspects discussed in this white paper, as well as numerous examples illustrating how to apply the guidance, refer to our publication, A guide to revenue recognition.