Accounting for Breweries – What you need to know moving forward

The following post is from Forrest Rose, owner of Grey CPAs in Windsor, CO – Forrest helps growing breweries keep their accounting in order so they can concentrate on what they are good at – pumping out delicious beer!

Denver and Colorado microbrewer opening rates have surged in recent years, and for good reason. Talented brewers have taken advantage of the growing thirst of Colorado beer loving patrons who want to taste different varieties of beer concoctions. As an accountant who spends a lot of time in breweries helping owners sift through the accounting changes taking place every single year, I’m very lucky to live in this great state of Colorado, where the breweries are plentiful!

Because we spend a lot of time in breweries, we hear stories about hopeful brewers flaming out before they got a shot to successfully distribute their beer. Some don’t make it to where they want to be because of lack of funding, some because of not properly tracking or preparing for operational costs.

For the breweries that have achieved fiscal sustainability, the tax and financial code is an important thing to understand, or have your accountant understand. The below explains more of this in detail, but if you have questions, of course reach out to a certified public accountant.

New FASB update for revenue recognition (how companies make money) and the 5-step approach a company should utilize to ensure revenue is appropriately recognized:

  • Identify the contract(s)
    • What this means is that companies must identify all contract types (pricing arrangements, terms of payment, shipping terms, etc.) and revenue streams.
  • Identify the separate performance obligations
    • What this means is that an entity must identify what goods or services are being sold in the contract and ensure that those performance obligations are segregated appropriately
  • Determine the transaction price
    • Is the price fixed or determinable? Is there a variable component? An entity must determine this.
  • Allocate the transaction price to the separate performance obligations
    • Each performance obligation above must be linked to a determinable price.
  • Recognize revenue when the entity satisfies a performance obligation.
    • An entity can only recognize revenue when the goods or services have been provided.

A lot of brewery owners may look at the above, and be a bit confused, which is where an accountant can help. Whether breweries have a CPA on staff, or bring one in to help them, it’s important to make sure the financial and tax codes are understood, as they change regularly.

We hope this was helpful to all the Colorado breweries that are already booming or just getting started!

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