The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...
Dec. 7 — The top accountant at a giant maker of farm equipment—a company far along in preparing for new, sweeping revenue accounting rules—had three words of advice Dec. 6 for her large audience of management CPAs and auditors: “Document, document, document.”
Lara Long, vice president for accounting and corporate reporting at Atanta-based AGCO, the makers of Massey-Ferguson tractors, corn cribs and poultry feeding equipment, said: “It’s so important that you document every process that you’ve gone through.”
And in the documentation and related tasks, “lawyers are your buddies,” she said.
The processes to which Long referred include making an inventory of contracts with customers that generate revenue, the timetables and terms of those agreements and how those contracts and other arrangements may change with the advent of the far-reaching accounting standard on revenue recognition that public companies must apply in 2018.
Such documentation likely will be important down the road because, as Long and others on a panel at a conference of the American Institute of CPAs suggested, the application of the new accounting rules requires judgment -- and eventual explaining of actions and rationales for revenue reporting to auditors and audit committees.
Some 180 pieces of disparate, industry-specific, prescriptive guidance are being replaced by a one-stop set of accounting principles issued by the Financial Accounting Standards Board in 2014 (ASU 2014-09; ASC 606). The application of those principles calls for careful decisions on how to apply them.
Globally, many thousands of companies will shift to the new FASB standards or those similarly-worded revenue rules of International Accounting Standards Board (IFRS 15), also issued some 30 months ago.
The new revenue accounting master blueprint also presents prospects of broad change to reporting, the most important line in a company’s financial statements and a long-time leading topic of SEC enforcement.
Long and others on the panel at the annual AICPA conference reinforced a common, but still noteworthy message for companies and their accountants in preparing for the shift to the new revenue reporting regime: “Get started,” as Chad Kokenge, at PricewaterhouseCoopers partner and the panel’s moderator, said.
“For those not started, definitely get started,” said James Dolinar, a partner at accounting firm Crowe Horwath and chairman of the AICPA’s Financial Reporting Executive Committee. The panel plans to release a guide to using the new revenue rules - with a focus on the aerospace/defense and asset management sectors, later this month.
“Maybe, second, I would just add to that,” Dolinar said, “don’t forget about the internal controls —from top to bottom, start to finish—and definitely focusing on disclosures.”
Brian Allen, a partner with KPMG who is on FASB’s Transition Resource Group for revenue recognition, counseled that companies and auditors should communicate.
“Communicating within your company, communicating with your auditor, communicating within your [audit] firm,” he said. Audit clients, auditors, and regulators all are “going to be going through a learning process.” Such communicating “makes sure you’re not looking at something with blinders on and not recognizing something’s that important,” Allen said.
Josh Paul, director of accounting at Alphabet, Inc., advised: “Have the courage to think about things differently.” Earlier in the Dec. 6 discussion, Paul noted “the fact that many times people are hesitant to make the difficult judgments.”
To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Copyright © 2016 Tax Management Inc. All Rights Reserved.
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)