Heading to the Polls to Prepare for Revenue Recognition
Polling data on where public companies stand in complying with the upcoming revenue recognition standard suggests that they will be rather busy leading up to January 2018--the effective date for implementing Accounting Standard Codification (ASC) 606, the new revenue recognition standard.
During several sessions of a Bloomberg BNA and Deloitte & Touche LLP, co-hosted revenue recognition conference on Monday, May 8, 2017, at the Newseum in Washington, DC, attendees described themselves as not being fully prepared for the new standard.
Notably, zero percent of the respondents had completed a revenue recognition implementation plan, while 19% percent had not started their assessment plan. Up to 31% were implementing their assessment plan, and the remaining 50% were still assessing their implementation.
Furthermore, greater than 50% of the poll respondents had not established any budget for implementation, nor have they started to examine internal controls from a revenue recognition standpoint.
Why are companies still evaluating the ramifications of the new rules three years removed from the release of the revenue recognition standard? Perhaps there is complacency stemming from more than 50% of the respondents who do not expect a material impact as a result of the revenue recognition changes.
“The changes in the new revenue standard will impact nearly all companies,” warned Sylvia Alicea, Professional Accounting Fellow at the Office of the Chief Accountant with the Securities and Exchange Commission. She said “even if the extent of change on the balance sheet or income statement is not deemed to be material, the related disclosures may be material.”
Continuing on a similar theme, 45% of respondents had not yet started to assess their disclosure requirements simultaneously with their implementation standards and measurement principles.
Honing in on the importance of disclosures, Alicea said to include “significant reasonable judgments the registrant has made when applying the guidance,” but Eric Knachel, Senior Consultation Partner, Revenue Recognition with Deloitte, sees the most challenging part of the entire standard as applying “judgment versus consistency.”
When asked how a company is managing the resources needed to implement the revenue recognition standard, 44% of the respondents were leveraging existing resources, whereas 30% are hiring external resources, and only 9% were hiring additional full-time staff, with the remainder of respondents unsure.
In relation to implementation risks, Alicea said “risks may include whether the employees involved in the transition to new GAAP standards have the appropriate competencies to make the reasonable judgments required to faithfully apply the principles in the standards.” Companies are predominantly choosing to leverage existing resources, and that may be putting a strain on some company’s ability to effectively implement the new revenue recognition standard.
|Which of the following best describes your current implementation status?|
|Have not started||19%|
|How is your company managing the resources needed to implement the rev. rec. accounting changes?|
|Leveraging existing resources||44%|
|Hiring external resources||30%|
|Hiring additional full-time staff||9%|
|Do you expect the standard to have a material impact on your company's financial statements?|
|Have you started to examine internal controls from a revenue recognition stand point?|
|Has your company established a budget for implementation?|
|Have you started to assess your disclosure requirements simultaneously with your implementation standards recognition and measurement principals?|
Continue the discussion at Bloomberg BNA Accounting LinkedIn.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)