The Securities and Exchange Commission (SEC) chief accountant, Wesley Bricker, recently addressed the American Institute of CPAs at their annual conference to discuss the future of the profession, the future of accounting standards, and more, but he made one thing certain: It’s time to get serious about the new revenue recognition standards.
SEC Chief Accountant: It’s Time to Get Started on Rev Rec
The standards have already been delayed to give companies more time to prepare, but companies have not made good use of their time as they attempt to adjust. A recent Intacct blog on ASC 606/IFRS 15 shared just how far behind many organizations are when moving to the standards.
According to a recent article in the Wall Street Journal, 8 percent of public companies are still yet to assess or implement the new revenue accounting rules. These are the companies whose reporting under the new standards begins for reporting periods after December 15, 2017—just over a year to go.
For private companies, whose implementation date is just one year later, the number jumps to a dangerously high 47 percent, per PwC.
In a recap of the AICPA Conference by the Wall Street Journal, Mr. Bricker made it clear that he was disappointed with the progress, and noted that his staff will be seeking additional disclosure into the progress of companies who will be affected by the 2017 deadline:
“Since my remarks at this conference last year, when I said the overall state of readiness may be lacking, clear progress has been made by preparers, but there is more to do,” he said in a speech at the American Institute of CPAs conference in Washington on Monday.
“Investors and OCA [Office of the Chief Accountant] staff will be looking for increased disclosures in 2016 filings and also during 2017 about the significance of the impact, whether quantitative or qualitative, of revenue recognition,” Mr. Bricker said.
Companies that are still behind schedule on assessing and implementing the new revenue rules must hold frank discussions about the cause of the delays and disclose them to investors.
This strongly-worded recommendation makes it clear: Prepare now or risk company reputation, fines, or more.
Preparing for ASC 606/IFRS 15
Companies who have already moved or have started the move to the new revenue recognition standards know that it’s not as easy as they had initially believed. According to a survey of financial leaders by FERF and PwC, the coming changes will be difficult. When asked about seven key facets of implementation, respondents found everything about the standard to be either “somewhat” or “very” difficult:
- Contract Reviews (current and ongoing): 78%
- Developing and Implementing New Accounting Policies: 76%
- Documentation of Conversion Process and Associated Auditability: 76%
- Quantification of Adjustments: 72%
- Project Management: 71%
- Revisions to Systems and Associated Controls: 68%
- Identification of Accounting Differences Across the Organization: 64%
Simply put, it pays to act now. To address this, Wipfli/Brittenford has announced a new whitepaper, The Definitive Guide to New Revenue Recognition Rules, which seeks to provide readers with more background, as well as offer best practices and advice to help readers prepare for the coming standard.
See a preview below and download here: