The new revenue recognition accounting standard (ASC 606, Revenue from Contracts with Customers) is one of the most complex and sweeping new accounting standards that has been issued during the last 20 years. This 700 page, principals-based standard:
- Affects the timing of revenue recognition.
- Requires massive new disclosures.
- Impacts finance, sales, contracting, processes, internal controls and information systems.
- Necessitates critical management decisions, judgments, and estimates.
- Requires a significant effort and lead time to adopt.
Implementing the new standard will be time consuming and will necessitate substantial human resources. Therefore proper planning and execution are paramount in order to achieve a smooth transition, avoid surprises, and mitigate audit costs.
Puncel Consulting Associates can assist companies with assessing, planning and adopting the new standard in the following ways:
- Identify key impacts of the standard on a company.
- Provide customized training across the organization.
- Project planning and management.
- Assist in identifying necessary changes to information systems.
- Identify, advise, and document significant judgments and estimates.
- Compile supporting data.
- Ascertain and document the company’s historical business practices.
- Compile and document external data supporting estimates.
- Document the whole process.
- Evaluate alternatives and determine the transition method.
- Develop financial statement disclosures.
- Design and implement Internal controls.
- Audit preparation.
While the new standard is effective for annual reporting periods beginning after December 15, 2017 for public companies and December 15, 2018 for private companies, companies should not delay their implementation efforts. The standard will have a significant effect on systems, processes and controls. Also, depending on the transition method chosen, a company may be required to keep a dual set of books under old and new revenue recognition standards for up to two years before the year of adoption. Consequently, a company should be considering how the standard impacts them well in advance of adoption.
For a complimentary one hour initial consultation on how the new revenue recognition standard will affect your organization and more information as to how we can assist you, contact us.
