Johnson Lambert is dedicated to keeping you current on the impact of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606). This white paper presents the most significant information related to applying ASC 606 to noninsurance contracts entered into by MGAs and related organizations.
Background
In 2002, the FASB and International Accounting Standards Board embarked on a joint project to clarify the principles for recognizing revenue. In 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, the first of several ASUs that created and amended ASC 606. This standard was effective January 1, 2019 for nonpublic companies, and set out a single framework for revenue recognition. This standard supersedes virtually all previous revenue recognition guidance with the exception of certain industry specific guidance. Insurance contracts, such as property and liability, life and health, title, and mortgage guarantee contracts, are specifically scoped out of ASC 606, and continue to be accounted for under ASC 944, Financial Services – Insurance. However, MGAs and related organizations commonly enter into non-insurance contracts that are within the scope of ASC 606.
