1. At sale: expense doesn’t match revenue Most consider the expense to create a RE C as $0 anyway. Expense recognition 25 Life at Deloitte Podcast. Highlights of the New Standard. Applying IFRS in Power & Utilities The revised revenue recognition proposal — power and utilities March 2012 IASB — proposed standard. The new revenue standard – effective from 1 January 2018 – is likely to affect the way you account for revenue. August 2017 Many utilities track asset data, but what happens when there is so much data that it cannot be properly managed or utilized to its fullest potential? We are the American Institute of CPAs, the world’s largest member association representing the accounting profession. With the onset of the COVID-19 global pandemic in 2020, M&A activity in the P&U sector saw initial reductions in both deal volumes and total deal value; however, deal value rebounded in the second half of the year. Current power price scenarios from Energy Brainpool model the expected average revenues of offshore wind plants in Germany until 2050 in three scenarios characterized by different sensitivities: Standard, Conservative and Low-Price. 1. Search. The complex arrangements between power and utility companies, governments, and customers pose some of the most difficult issues. current revenue recognition guidance, including industry-specific guidance.3 •he new guidance is not expected to significantly change current practice for rate- T regulated operations that use published tariff rates to recognize revenue upon delivery of electricity or natural gas to a customer meter. Create your account. Reporting entities in the power and utilities industry, including regulated and non-regulated power companies, will be affected by the new revenue recognition standard (the “new standard”), which replaces substantially all of the current U.S. GAAP and IFRS revenue recognition guidance. Tucson Electric Power Receives Decision in General Rate Application December 23, 2020; Fortis Inc. This course which will cover many concepts up to and including the most recent Tax Cut and Jobs Act. Access to additional resources and insights on the new standard. A US-based utility generating power from coal, natural gas and wind turbine sites managed hundreds of thousands of assets worth a total of over $1 billion. The standard will eliminate the transaction- and This major overhaul of revenue recognition (effective for fiscal years starting after December 15, 2017 for public companies) affects almost every sector of the economy, and the power and utility (P&U) industry is no exception. a ‘series’), as well as the effect of the new standard on alternative revenue programs, requirements contracts, renewable engery credits and capacity sales, Specific issues for power and utilities companies. The current emphasis on more testing on controls over revenue recognition now is largely a derivative of PCAOB interest in the topic in the past year or two. Revenue Recognition for Fixed Price Contracts – Consideration of Different Pricing Conventions . This approach is explained in the following example calculation for a wind power plant. Sharing our expertise and perspective. KPMG’s insights on ASC 606 implementation. In fiscal years beginning after, Early adoption allowed in fiscal years beginning after. Some are essential to make our site work; others help us improve the user experience. Power, utilities & renewables; Technology; Telecom, media & entertainment; Transportation & hospitality; Spotlight. Revenue Recognition Industry supplement - Power and Utilities However there is a practical expedient to recognise revenue based on a right to invoice if that corresponds with the value the customer has received to date. 16-6: Management Fee Agreements KPMG insights into revenue recognition in financial reporting. Intended to help power and utility companies with applying ASU No. With the new revenue standard now in effect, KPMG reports on the most significant industry issues. All rights reserved. revenue recognition. Receive timely updates on accounting and financial reporting topics from KPMG. Issue status update. revenue is changing. See more. Financial reporting impacts of coronavirus. Fortis continues to power ahead as we seek additional opportunities to diversify our asset base and grow our company both within our existing franchise territories and beyond. Utilities The new revenue recognition standard power and utilities What you need to know Application of the requirements of the new revenue recognition standard will require P&U entities to use a greater degree of judgement. US business impact of COVID-19; Deloitte Review; Economic weekly update; Future of mobility ; Future of work; Industry 4.0; Internet of Things; US business impact of COVID-19; Careers. What you need to know •Financial Accounting Standards Board (FASB) (collectively, the The IASB and the FASB have issued a second exposure draft of their converged revenue model that is closer to current IFRS and US GAAP than their 2010 proposal. Full revenue recognition implementation issues will be posted below for informal comments after review by the AICPA Financial Reporting Executive Committee (FinREC). the timing for revenue recognition – i.e. If your company hasn’t yet begun implementing the changes to revenue recognition, now is the time to start. We don’t have any exposure to government utilities that alloc ate cost of a REC to inventory (out of power supply costs). a ‘series’), as well as the effect of the new standard on alternative revenue programs, requirements contracts, renewable engery credits and capacity sales. Chartered Global Management Accountant (CGMA), Certified Information Technology Professional (CITP), Certified in Entity and Intangible Valuations (CEIV), Certified in the Valuation of Financial Instruments (CVFI), Employee Benefit Plan Audit Quality Center, Get a free version of Adobe Acrobat Reader, Power and Utility Entities Revenue Recognition Task Force, Randall Hartman, Edison Electric Institute (Co-Chair), Jim Nowoswiat, Baker Tilly Virchow Krause, LLP, Eric Thiergartner, American Electric Power. We generate revenue from selling power to our customers (utilities and private enterprises), EPC contract management, and O&M services. whether to recognise revenue immediately or to defer it. However, all power and utilities entities have needed to carefully consider the standard’s new and modified quantitative and qualitative disclosure guidance, which has significantly increased the amount of information that companies must disclose about revenue activitie… For utilities, transformations can yield productivity improvements, revenue gains, better network reliability and safety, enhanced customer acquisition and retention, and entry into new business areas. Judgment may be required to conclude whether the invoiced amounts correspond with the value received. Summary• Two requirements for revenue recognition: – Shipment of goods in case of sale of goods or completion of service in case of service AND – Insignificant risk of realization or collection 9. Project development. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. Equity in earnings of unconsolidated investees also includes the impact of the company's share of 8point3's earnings related to sales of projects receiving sales recognition under IFRS but not GAAP. But we do see this could be a reasonable approach. 13-1: Accounting for Tariff Sales to Regulated Customers; The following working draft was issued by the Timeshare Entities Revenue Recognition Task Force: Implementation Issue No. Our advice for now? Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Yes, becoming a CPA can be a challenging journey. an accounting change. Kelen is a CPA with over 15 years of progressive finance and accounting experience. Our advocacy partners are state CPA societies and other professional organizations, as we inform and educate federal, state and local policymakers regarding key issues. He currently serves as an Accounting Policy Advisor with HP, Inc. in Budapest, Hungary and previously served as a Senior Accounting Policy Manager for the company in Houston, TX (relocated in 2018 due to spousal expat assignment). The mounting pressure to transform also offers the rare opportunity to rebuild strategies, structures, and processes from the ground up. Challenging journey the first quarter of 2018 CPA can be a challenging journey GAAP and it... January 2018 – is likely to affect the way you account for revenue way you account for revenue current GAAP! Transfer of control of the good or service to the placement of these cookies more later... ), Cut and Jobs act Banker Blueprint + Discover How to Into. Listed below advice after a thorough examination of the new revenue standard now in effect, KPMG reports the. That you 're gaining knowledge straight from the ground up 115 is discussed below the list will be below! 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