Fall 2009 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

We will continue to keep you updated on these new tax and financial reporting developments within the construction industry.

based revenue recognition model. The boards expect that entities will recognize revenue under this model more consistently, regardless of the industry in which an entity operates. Written comments on the discussion paper were to be submitted to the boards by June 19, 2009. The AGC responded to the discussion paper and included the following comments: • Concerns were expressed that a single revenue recognition principle is not necessarily a meaningful enhancement of generally accepted accounting principles. Emphasis was placed on the fact that every contract is unique. A contractor has never built the exact project under the same terms and conditions before and will never build it again. • After 28 years of applying the principles and guidance of SOP 81-1, the construction industry contractors, auditors and users of their financial statements have substantial understanding of the SOP 81-1 standards. The practices are both accepted and applied in the industry and the principles produce faithful representations of the financial condition and results of operations of construction entities. Concerns were expressed that the proposed method, when taken as a whole, will result in substantial changes in the timing of revenue recognition in the construction industry. • The AGC requested that long-term construction contracts be exempt for the proposed principle and requested the boards’ consideration of a separate revenue recognition standard that is aligned with SOP 81-1. • The AGC believes that a valid test of any new principle that is intended to replace the guidance of SOP 81-1 should be tested against the outcome of SOP 81-1. If the revenue recognized in a given period significantly differs from that which would be recognized under SOP 81-1, it is likely that the principle is flawed.

Questions? Contact:

Frank Hogg, CPA Partner-in-Charge Contractors Services Group 314.290.3413 frank.hogg@rubinbrown.com Mark Jansen, CPA Partner Contractors Services Group 314.290.3208 mark.jansen@rubinbrown.com

30 u fall 2009 issue