Here is an interesting article about the new revenue recognition rule (ASC 606) and accounting software requirements.
By Intacct Staff Writer
To start, both private and public companies are facing the biggest accounting change in a decade.
The new standard provides a comprehensive revenue recognition model intended to increase financial statement comparability across companies and significantly reduce the complexity inherent in today’s revenue recognition guidance. Starting in 2018 for public companies and 2019 for private companies, ASC 606 and IFRS 15 revenue recognition guidelines from the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) will require companies to reallocate revenue with greater frequency—each time a customer contract changes—and defer expense recognition to align with the contract’s delivery.
As a result, contract add-ons and renewals must be integrated into a single contract and will trigger reallocations across both past and future periods—causing continuous revisions to revenue allocations and expense alignment.
The AICPA detailed who exactly is affected by these new rules: “The revenue recognition standard affects all entities—public, private, and not-for-profit—that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets.” Bottom line—this will affect a lot of companies.
I get it—2018 seems like a ways out right? Kind of; but in regards to these new accounting rules, you need to take action now, as any customer contract that extends beyond the start date will be effected.
For example, a public company writing two-year contracts would be impacted immediately. Furthermore, most companies will need to recast prior-period financial statements using the new guidelines in advance of the start date in order to provide proper comparative and future guidance to investors.
So what can you do to prepare for these changes? Intacct’s Contract and Revenue Management capabilities fully address all the upcoming rules for revenue reallocation and expense amortization—using automation, not spreadsheets and a lot of accountants’ time. This comprehensive solution provides out-of-the-box functionality that reduces dependence on IT resources and doesn’t require complicated scripting or manual effort.
Robert Kugel, SVP and research director at Ventana Research, notes, “Companies that will need to plan and budget both “real” and accounting numbers in parallel should not expect they can do it using spreadsheets. While accomplished spreadsheet jockeys may be able to create an initially serviceable model, it’s likely they and the rest of the FP&A organization will find themselves working long hours dealing with complex data imports, identifying period-to-period differences and tracking cumulative variances.”
We’ve designed Intacct Contract and Revenue Management to make companies audit-ready, while delivering the continuous insights needed to make their financial future predictable. The new software enables companies to simultaneously manage revenue using both the current and new accounting guidelines—allowing them to operate under current guidelines and the new standards.
Intacct Contract and Revenue Management enables finance teams to:
- Automate complex processes for addressing all new ASC 606 and IFRS 15 rules for revenue reallocation and expense amortization
- Disclose the impact of changes with confidence with automated dual treatment at the transaction-level
- Solve the most onerous requirement for transitioning to the new rules with automated dual reporting
- Clearly see the impact of the new rules on the company’s future results with revenue and expense forecasts based on both current and new guidelines
- Automate complex subscription billing, including usage-based billing, with full integration to revenue recognition
- Ensure the business will track according to its operational model using instant insights into SaaS metrics
The new ASC 606 and IFRS 15 accounting standards—some of the most far-reaching changes to accounting since Sarbanes-Oxley—are only a few quarters away. Get ASC 606 Resources such as news, assets, and learn about the advantages Intacct provides in helping you address these changing rules. Or, Watch a video overview of Intacct Contract and Revenue Management.
[ Published: July 14, 2016 ]