Have you constructed (or reconstructed) your revenue recognition process?
The FASB’s new revenue recognition accounting standard promises to shake up existing processes, controls, and contracts that have been developed (at least in the U.S.) around very prescriptive rules. It transforms the guidance into a flexible, principle-based model that’s foundation is substance over form—and, ultimately, attempts to install a bay window providing a wider view into revenue for investors and stakeholders. The building blocks are comprised of a five-step prototype that requires heavy lifting by CFOs, controllers, and most other departments that have contracts, data, systems, or processes, that impact or are impacted by revenue recognition. While the FASB has delayed the groundbreaking dates of the revenue recognition standard to reporting periods on or after December 15, 2018, for private companies (and December 15, 2017 for public companies), it requires collecting up to three years of annual and/or quarterly comparative data should an organization choose the retrospective application option. So you should start the construction or retro-fitting of your processes as soon as possible.
Revenue Recognition Timing
Three reasons it’s now
While the first applicable reporting period is more than two years away, many companies need to implement time-consuming new controls, systems, and processes.
Some may choose to adjust prior-period results and provide three-year comparative financials required under retrospective application of the new guidance.
As is typical with the implementation of any new standard, we expect additional regulatory and audit scrutiny. Therefore, ongoing monitoring is important.
Departments Impacted by Revenue Recognition
The changes are deep and wide
Seize the Day: Start Planning Now for Revenue Recognition
Stop, Drop, and Rev Rec Roll
Why Revenue Recognition Matters to You
Unique Hospital Challenges with the New Revenue Recognition Standard