There’s a good reason that nearly every vendor, accountant, or accounting software provider is talking about ASC 606/IFRS 15, and has been for the past 18 months. It’s a challenge, it’s a process, and for organizations that delay, it’s a major risk.
If you haven’t read the studies, organizations are finding that a transition to the new standard is often more painful than initially expected. We discussed some of the challenges in this blog, which found that organizations expected (or discovered) that the following would be 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%
Today, however, we’d like to take a look back, discussing some of the basics, some of the articles we’ve written on the topic, and offer some additional advice on how to prepare.
The Basics: Background and Links to Full Text
In May 2014, FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), and the International Accounting Standards Board (IASB) issued International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers.
According to an AICPA brief on the guidance, businesses—generally in the Aerospace, Communications, Defense, Engineering, Law, Media, Information Technology, Management Consulting, Marketing Services, and Pharmaceuticals industries—have a challenge ahead to stay up to date with the update and to properly recognize and report revenues under the new standards.
You can view the full text of the document here, learn about the subsequent changes to the document, and read about industry task forces in charge of discussing the issue here.
The Analysis: Blogs, Guides, and Whitepapers to Prepare for the New Standards
Over the past 14 months, we discussed this issue in depth, offering multiple blogs and a whitepaper on the topic. You can learn more about these below, as well as a few interesting resources from across the web.
Blogs and Resources from Wipfli/Brittenford
- Comparing and Contrasting Full and Modified Retrospective: The idea of rewriting contracts and restating revenues looks to be one of the most prevalent challenges for organizations making the move, but to make the switch, organizations have two options—full retrospective and modified retrospective. Learn about each here.
- Budgeting and Planning in the Wake of ASC 606: Not only will the new standard affect accounting, it will affect budgeting and planning as well. This means changes to the way organizations plan corporate events (contracts, commissions, etc.), as organizations will now have the ability to plan them in parallel with accounting events.
- Five Non-Accounting Departments Affected by ASC 606: It’s not just accounting who will have to make changes; ASC 606 will change the way multiple departments operate. Learn which ones it will affect here and how they can prepare.
- Six Key Considerations to Take Away from the New Standard: In this article, Wipfli explores some of the most important takeaways for businesses, and how they will change the way you need to operate.
Industry Guides: Revenue Recognition
As a top 20 Accounting firm, our parent company, Wipfli, is well studied in the changes, and has written a series of industry guides to help address modifications to industries like Construction, Real Estate, Healthcare and more.
- Revenue Recognition Guide for the Software and Technology Industry
- Revenue Recognition Guide for the Manufacturing and Distribution Industry
- Revenue Recognition for the Healthcare Industry
- Revenue Recognition for the Construction Industry
Learn more at Wipfli.com/revenuerec.
Whitepaper: A Financial Professional’s Guide to Upcoming Revenue Recognition Rules (Preview)
Below, you will find a preview of our document, ASC 606/IFRS 15, A Financial Professional’s guide to upcoming revenue recognition rules, which you can download in full here.