“We Don’t Need No Stinkin’ New Guidance!”

Big changes in revenue recognition are coming down the pike for just about everyone in the form of ASC 606 / IFRS 15.

But what about everyone else?

Some companies are not going to significantly change how they recognize revenue because of the newly converged guidance.

What say we, you ask? We say…

– There are companies which may not plan to adopt such concepts as allocations, variable consideration, VSOE, residual method, etc.
– There are companies which might not be recognizing commission expenses along with revenue in a way that would require adoption of the new guidance.

“Some of the companies have performed their high level impact assessment and concluded that while they will be impacted by ASC 606, the impact may not be that material and does not require significant burden on existing resources,,” said Jagruti Solanki, Assurance Senior Manager at Aprio, a CPA-lead business advisory firm.

Solanki noted for most companies with a lot on their plate, the natural tendency is to wait until the mandatory adoption date.

“We are discussing adoption timeline with our clients on a case by case basis as it suits them most,” she said.

Sure, all companies need to do an impact assessment (and certainly by now hopefully have done so) on the potential changes in the new guidance and in the case of these aforementioned situations, the companies in question would need to demonstrate to their auditors there’s no need for change.

The changes associated with the looming adoption may, in cases, be spread over an extended period of time, according to analysis from the field.

“We believe a lot of organizations are planning to perform new record keeping using a manual, or partially automated approach to achieve their adoption date with some pursuing more robust systems automation at a later point in time,” said Jeff Johnson, Executive Director for Advisory Services at Ernst & Young. “For organizations with a moderate to high impact on their existing processes and systems, we suggest they consider a parallel effort that leverages their work on a manual or partially automated approach to build out a more fully automated approach that is able to be deployed later in their adoption year or early in the year that follows.”

As noted in a recent article in Compliance Week, even companies expecting little change in their numbers due to the new guidance still face new disclosures and significant changes in accounting processes. That article noted the continued concern from regulators and audit forms at the snail’s pace in general progress by most firms toward implementation of the new standard. A recent survey by Compliance Week noted 65 percent of respondents had yet to determine how they would transition to ASC 606.

Everyone needs to adopt the new guidance, but in some cases, that adoption effort might not require significant changes.

And in all scenarios – those in the ‘just about everyone’ camp, with massive changes, and the few others without – RevPro offers a solution to fit your needs.