ASC 605-28: Streamlining Milestone Method Compliance with Advanced Solutions

Posted In | ASC Accounting

The complexity of revenue recognition increases as businesses engage in contracts with milestone-based arrangements. Accounting Standards Codification (ASC) 605-28, "Revenue Recognition – Milestone Method," provides guidance on recognizing revenue from these arrangements. In this article, we will discuss how advanced solutions can streamline compliance with ASC 605-28 and help businesses manage milestone-based revenue recognition more effectively.

 

What is ASC 605-28?

ASC 605-28 is a revenue recognition standard that specifically addresses the milestone method of recognizing revenue for research or development arrangements. Under this method, a company can recognize revenue in its entirety when a milestone is reached if the milestone is deemed substantive. A milestone is considered substantive if it meets the following criteria:
 

1. The milestone is non-refundable.

2. The achievement of the milestone is uncertain at the inception of the arrangement.

3. The milestone represents a significant and incremental event or risk.
    

Compliance with ASC 605-28 is crucial for accurate financial reporting and to avoid potential regulatory issues.

 

Advanced Solutions for Compliance

Advanced solutions, including specialized software and integrated systems, can simplify the process of complying with ASC 605-28. Here are some key features to consider when choosing an advanced solution to help your business stay compliant:
 

1. Customizable milestone definitions

Choose a solution that allows you to define and customize milestones according to your specific needs. This enables you to accurately apply the milestone method to each arrangement and ensure compliance with ASC 605-28.

 

2. Automation of revenue recognition

Advanced solutions should automate the process of recognizing revenue when milestones are reached, reducing the risk of human error and ensuring timely and accurate revenue recognition.

 

3. Real-time tracking and monitoring

Your chosen solution should provide real-time tracking and monitoring of milestone achievements, allowing you to quickly identify when revenue should be recognized and maintain up-to-date financial records.

 

4. Integration with other systems

To guarantee that all relevant information is considered when recognizing revenue, your advanced solution should integrate seamlessly with other systems, such as customer relationship management (CRM), enterprise resource planning (ERP), and billing systems. This ensures that data is accurate and up-to-date, reducing the risk of non-compliance.

 

5. Reporting capabilities

Your advanced solution should offer comprehensive reporting capabilities, enabling you to generate reports that demonstrate compliance with ASC 605-28. This can be particularly useful during audits and when addressing inquiries from regulators or other stakeholders.

 

6. Scalability

As your business grows and the complexity of your milestone-based arrangements increases, ensure that your chosen solution can scale with your business and accommodate an increasing number of arrangements and revenue streams.

 

Compliance with ASC 605-28 can be challenging, especially for businesses with complex milestone-based arrangements. By investing in advanced solutions that simplify milestone definition, automate revenue recognition, and integrate with other systems, businesses can ensure accurate financial reporting and remain compliant with ASC 605-28. In today's fast-paced and competitive marketplace, leveraging advanced technology solutions is essential to help businesses effectively manage milestone-based revenue recognition and maintain financial transparency.