By Saloni Madhok, Marketing Manager at Zuora
The end of a calendar year and all the holiday festivities accompanying it offer enough stress-inducing opportunities without us piling on, but we will anyway.
The roadmap to success with the new revenue recognition standard should have started in 2014, according to accounting experts. Yes, the year with just a couple weeks left to go. That one.
In publications presented by the American Institute of Certified Public Accountants (AICPA) to help companies map out education and implementation of the newly issued guidance update, many milestones include timelines that begin – and sometimes end – in 2014.
Basically, if you aren’t already in preparation mode, you have some catching up to do.
Although the effective date of the new guidance is a few years away, some initial decisions will have significant impact on a company’s financial statements, information systems and processes. For example, how a company chooses to adopt the revenue recognition standard determines the years that revenue and the direct effects of change in accounting principle associated with contacts will need to be restated.
“The prospect of preparing for a historic, game-changing revenue recognition standard can be a bit daunting…companies should take advantage of the delayed effective date and prepare for the transition to the new standard.” — AICPA
Within the suggested timeline for public entities to implement the new revenue recognition standard (non-public entities have an additional year to adopt), the following activities are recommended for 2014:
|Assign staff or develop task force to take lead on understanding and implementing the new standard||2014-2015|
|Evaluate changes from current GAAP to the new standard and any ensuing impacts for your company and auditor||2014-2016|
|Determine adoption method, and how to track account differences for periods requiring restatement||2014|
|Determine any necessary changes necessary to IT systems or software applications||2014|
|Determine any necessary interim disclosures prior to effective date of the new standard||2014-2016|
|Develop an evolving project plan for implementation, taking all prior actions into account||2014-2016|
As you can see, a lot is expected to have already taken place. As daunting as this may seem, you shouldn’t get too discouraged if your efforts are behind the suggested timeline. According to reports, you are not alone and may be granted some breathing room.
If a public entity chooses full retrospective adoption, revenue and the direct effects of change in accounting principle to all contracts must be restated for 2015 and 2016 to show comparative financial statements with a cumulative adjustment as of January 1, 2015.
In any case, take this as another reminder that the new revenue recognition guidance requires the proper time, planning and precise implementation preparation to succeed.
So, again, happy holidays?!
Stay tuned for future posts as we continue to help you and your company prepare for this new standard.