The Financial Accounting Standards Board (FASB) issued a new accounting standard for revenue recognition. The new rules aim to increase comparability and transparency across all industries. The result, however, is that it may require significant changes compared to how and when you record revenue today. This new accounting standard is one of the biggest accounting changes in over a decade and may require significant effort by companies in order to be ready by the effective date.
Our experienced professionals at Lurie can help you navigate the impact of this new standard – whether it is providing industry guidance, developing an action plan for your organization, reviewing contracts, analyzing revenue transactions, presenting to stakeholders, or simply acting as a resource for you.
Why was the new standard issued?
- To provide a single comprehensive five-step model to increase comparability and transparency
What could be the impact to my business?
- Processes and internal controls may need to change to evaluate each significant attribute of a contract and address new financial reporting requirements
- More data and information may need to be tracked and supplied for disclosure purposes in the financial statements, although the FASB has provided some relief for private companies by allowing them to elect to not provide certain disclosures
- Timing of revenue recognition and balance sheet presentation may change, which could affect:
- Compliance with bank loan covenants
- Budgeting analysis and forecasting results
- Income taxes
- Compensation and bonus plans
When is the standard effective?
- Years beginning after December 15, 2017 and December 15, 2018 for public and private companies, respectively
- Prior comparative periods presented will need to either be restated or quantified as to what the impact would have been had those periods been restated
What can I do to prepare?
- Start now – establish a detailed project plan, assemble internal resources, and inform all stakeholders, including those charged with governance
- Analyze significant revenue streams and contracts to assess the potential impact
- Leverage filings from similar public companies but still perform your own company-specific analysis
- Consider developing a training for all employees involved in the revenue process (such as sales, IT, legal, HR, and tax) as the new standard could have a widespread impact across multiple functions
Please contact us for more information about our services.