We’re here to help.
That’s just how we are. Whether it’s to let people know the latest status on the newly converged revenue recognition standard, or the best way to prepare for this change, we’re here for you.
With that in mind…
That one-year reprieve until the new guidance becomes effective gives folks a bit of breathing room, but we assume that will be heavy breathing while running around to get everything accomplished in what is still a tight time frame.
“The effective date of the standard will be upon us before you know it,” said Chief Accountant James Schnurr of the U.S. Securities and Exchange Commission, during a recent speech as reported in the Journal of Accountancy.
Schnurr said he’s been pleased to see financial preparers, auditors and others come together to help identify and resolve implementation issues with the new standard. As this space has noted before, the clarifying changes to the new standard being worked on by governing boards are just that – clarifications – and shouldn’t be seen as wholesale changes requiring a halt in preparations for the coming transition.
A more consistent application of the revenue recognition standard – one of the goals sought by the FASB and the IASB – is expected to come to fruition and make life easier for companies in the end, but will require some big-picture thinking when it comes to implementation, Shnurr said in the Journal of Accountancy article.
“Revenue is one of the single most important measures used by investors, and I believe the new standard – when applied with professional judgement – will consistently report revenue, regardless of the company’s industry or the capital markets accessed,” he said.
Schnurr recommended organizations consider how the new guidance will have an affect beyond the financial statements, to information systems, business processes, contractual arrangements and tax-planning strategies when considering an implementation plan.
Some other tips offered:
1) Management should assess whether new processes or controls, internal or otherwise, are needed to gather accurate and complete information to satisfy new reporting requirements.
2) Consider whether adequate resources are being dedicated to analyze the full breadth of the impact of the new standard. As Schnurr noted, this massive change will put pressure on resources for reporting earnings and preparing periodic reports.
3) Management needs to be prepared to identify why changes are occurring – and, conversely, why changes are not occurring, factoring in industry trends.
4) Be prepared to challenge conclusions which may be in conflict with the core business.
5) Implementation plans need to consider how the new standard’s impact on an organization’s financial statements are communicated by management to the core constituency.
************************************************************************************
In other news worth noting, the American Institute of Certified Public Accountants (AICPA) has started releasing working drafts of implementation issues for the new guidance, with industry sector-specific insight and examples starting with aerospace and asset management, as reported in Compliance Week.
The goal of the working drafts, according to the AICPA, is to help provide some industry-specific perspective for those more accustomed to that.
The AICPA is accepting comments on these drafts through the end of 2015.