Adopting the new revenue standard — Where do companies stand?
This Heads Up discusses certain considerations related to implementing the FASB’s new revenue standard, "Revenue From Contracts With Customers." The discussion compares the results of a 2016 Deloitte-sponsored survey with previously reported results from Deloitte’s 2015 survey. In the surveys, respondents were asked various questions pertaining to their readiness to adopt the standard’s provisions.
For public business entities with a calendar year-end (and other entities that elect early adoption), less than a year remains before the FASB’s new revenue standard becomes effective. Accordingly, there continues to be an emphasis on understanding where companies stand in their implementation process. For public companies, such emphasis has come from investors and regulators. For example, the SEC staff has emphasized that registrants need to be ready not only to adopt the new standard but also to communicate its potential effects to stakeholders before the effective date. The timeliness and quality of such communications will depend on a registrant’s state of readiness.
In our January 14, 2016, Heads Up, we discussed the results of an informal survey on the standard’s adoption and transition (the “2015 survey”) and noted some key observations:
- The majority of respondents did not plan to early adopt the new standard.
- While nearly 40 percent of respondents had not decided which transition method to use to adopt the new standard, those that had chosen (or indicated a “preliminary leaning”) preferred the full retrospective approach to the modified retrospective approach.
- Nearly three quarters of respondents indicated that the new standard could or would have a material impact on their financial statements.
- Slightly more than half of respondents had started to implement the new standard, but most were in the very early phases of adoption.
- Just over 10 percent of respondents had established a formal budget to implement the new revenue standard.
In December 2016, Deloitte conducted a second informal survey on implementing the new revenue standard. This Heads Up discusses certain results of the 2016 survey and compares them to those noted in last year’s Heads Up.
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Heads Up newsletters, published as warranted, analyze important accounting developments, such as new FASB and IASB pronouncements or exposure drafts. Concise examples and answers to frequently asked questions assist readers in understanding and implementing the critical guidance.