Navigate your company's journey
The new revenue recognition standard (Update No. 2014-09; ASC 606) is now effective for public companies. Although the new revenue standard is not yet effective for private companies, the January 2019 effective date is quickly approaching and companies should be focused on assessing the accounting and operational impacts of the new standard.
- How do you get started on the journey?
- Why is this important to your company?
- How can Deloitte help?
- What are some potential considerations and challenges?
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How do you get started on the journey?
Acknowledging the differences between public and private companies and the additional practical expedients available to private companies, the adoption journey for private companies will generally mirror the journey that public companies have taken. Therefore, private companies should familiarize themselves with their public company counterparts to benefit from best practices, lessons learned, common pitfalls, etc. The standard has broad implications and may affect many parts of your organization: financial statements, business processes, taxes, and internal controls over financial reporting. It requires the collaborative efforts of multiple departments within the company, including financial reporting, IT, sales, tax, investor relations, human resources, and others. Read on to learn what your organization can do to get started now or to continue down your current path toward implementation.
Addressing some areas of the FASB revenue recognition standard may require longer lead-time particularly those related to revenue or billing systems where separation and/or allocation changes may be required, so companies should perform a preliminary analysis of the new requirements as soon as possible.
Effective first steps to consider as you begin to evaluate the implications of the new FASB standard may include:
- Evaluating significant revenue streams and key contracts to identify the specific revenue recognition changes required and the specific business units where these changes may have the greatest impact
- Addressing the longer lead-time areas where new calculation engines or revised allocation processes may be required
- Establishing a granular project plan and roadmap to manage the effort across multiple business units and countries
For an in-depth review of Deloitte’s Roadmap, which includes our interpretation of the new standard, please visit our Roadmap series page or subscribe to receive Roadmap series publications via e-mail. Email us directly at RevRec1@deloitte.com with any questions or to request a meeting with one of our revenue recognition specialists.
Why is this important to your company?
Jointly issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board, the revenue recognition standard will supersede virtually all existing revenue recognition guidance in Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS). The intent of the new standard is to replace the existing guidance with a single industry-neutral revenue recognition model that will reduce complexity and increase financial statement comparability across companies and industries. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance.
How can Deloitte help?
Deloitte works closely with clients to help assess the impact of the new standard to the organization and support the business through the implementation phase, bringing the breadth and depth of experience required from functions such as accounting, data, process, technology, controls, tax, and financial reporting. We have the experience and capabilities to assist you on this journey.
The value we bring:
- ASC606 assessment and implementation experience across industries
- Deep revenue recognition knowledge
- Efficient approach and tools
- Globally-connected team
- Multi-functional team that knows audit, finance, tax, technology implementation, and more
- Strong vendor relationships
We have been advising our clients in their journey of adopting the new revenue recognition standard since its inception. We know your business has unique needs so our demonstrated approach includes assessment, detailed design, implementation, project management, change management, and more.
Deloitte can leverage its relationships with leading technology vendors to discuss or help implement revenue recognition solutions for our clients.
No matter where you are in the process–assessment, implementation, or somewhere in between–we have the experience and capabilities to help.
What are some potential considerations and challenges?
These changes may present complexity for companies in various industries. Examples of some of the challenges are:
- Bundled goods and services
- Transaction price calculations
- Contract considerations (i.e., contract combinations and modifications)
- Capitalization of costs to acquire customer contracts
- Tax compliance and planning
Organizations may need to consider other project needs, including:
- Implementation of updated or new systems, processes and controls, where required
- Effective training and communication of new requirements
- Effective program and resource management related to this effort
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Michael S. Thompson