The NetSuite Accountant

Biotech Comparables | Over Time & Point In Time Revenue Under ASC 606

Paul Giese Oct 31, 2018 6:00:00 AM
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Once the performance obligations in a  biotech collaboration agreement have been identified and revenue has been allocated to each performance obligation, an entity needs to determine whether revenue is recognized at a point in time or over a period of time. There are three criteria to determine if revenue is recognized over a period of time. For biotech companies, the most relevant criteria is whether the company's performance creates or enhances an asset (for example, in process research) that the customer controls as the asset is created or enhanced (criteria 2).

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Budget Considerations for ASC 606 Revenue Recognition

Paul Giese Oct 27, 2018 5:08:43 PM
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Under ASC606, collaboration revenue is recognized as a company incurs costs to deliver the performance obligation. Companies need to determine the total costs to deliver a performance obligation at the start of the collaboration agreement and make updates as new information becomes available. Because the budget and long-range plan are critical for recognizing revenue, companies will need to ensure that the appropriate processes are in place around these assumptions. Here are four budget considerations in the revenue recognition process:

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Biotech Comparables | Collaborator vs. Customer

Paul Giese Oct 16, 2018 7:05:00 AM
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When starting to assess whether your biotech collaboration falls under ASC 606, you first must determine whether the counter-party is a collaborator or a customer. Under ASC 606, a customer is defined as:

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Biotech Comparables | ASC 606 Transition Method

Paul Giese Oct 9, 2018 6:17:00 AM
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Publicly-traded biotech companies were required to adopt ASC 606 for their revenue recognition in their 2018 financial statements. Private biotech company companies must adopt ASC 606 starting in 2019. As part of the adoption process, companies must decide between two transition methods: the modified-retrospective method or the full-retrospective method.

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Understanding changes to your collaboration revenue under ASC 606

Paul Giese Aug 13, 2018 5:21:00 AM
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ASC 606 has made understanding revenue recognition patterns more complicated. Having an understanding of the model economics will help explain current period revenue and predict future revenue patterns. Below are the four drivers that impact how revenue is recognized over the life of a proportional performance model:

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Three accounting close considerations post-ASC606 adoption

Paul Giese Jul 30, 2018 5:55:00 AM
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A smooth accounting close is critical to producing financial statements efficiently and effectively. Public companies who have adopted ASC606 for revenue recognition have already felt the impact of the new data requirements on their close process. Here are three close areas that the new revenue standard will impact:

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5 Resources for Recognizing Biotech Collaboration Revenue

Paul Giese Jun 25, 2018 5:30:00 AM
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Interpreting the revenue recognition accounting guidance for your biotech collaboration is challenging if you aren't a technical accounting guru. Thankfully, there are great resources available online to apply the standard to your situation. Below, I discuss five resources to get you up to speed:

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ASC 606 Revenue recognition & impact on collaboration agreements

Paul Giese Jun 19, 2018 5:33:09 PM
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In May 2014, the Financial Accounting Standards Board (or FASB) issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606), changing how biotech companies account for the revenue associated with their strategic collaboration agreements.Public companies were required to adopt the standard by January 2018 and have issued their first set of financials in the Q1 2018 10-Qs. Companies such as Blueprint Medicines, Surface Oncology, Jounce Therapeutics and Seres Therapeutics to name a few. Private companies will be required to adopt the standard by January 2019.

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