How will the new revenue recognition methods impact your business, and how can you prepare as it comes into effect in the imminent future?
On May 28 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and the International Accounting 15, also issued Revenue from Contracts with Customers.
Although the release was in 2014, the new revenue recognition rules were originally set to be effective for public entity annual reporting beginning on or after December 15, 2016. With all other organizations having their revenue recognition effective dates beginning after December 15, 2017.
In August 2015, the FASB also issued ASU No. 2015-14, Revenue From Contacts with Customers – Deferral of the Effective Date, that extended the effective date to another year. Meaning under the new mandates, public businesses and certain not-for-profits would have to start annual reporting beginning after December 2017. While all other business entities would begin annual reporting beginning after December 15, 2018.
Read Also: How Much Time Are You Wasting Manually Handling Deferred Revenue?
With about a year and a half left for public entities and about two years for non-public entities, now is the time to start preparing for the revenue recognition reporting standards, to ensure that your business is ready before the effective dates.
Quick Tips To Help You Get Started With Implementing The New Revenue Recognition Rules
· Revenue recognition GAAP changes
Understand the changes from current GAAP to the new revenue recognition standards, and how this affects your current billing, revenue recognition, and reporting processes for your business.
· Evaluate your current revenue recognition accounting package
Ensure that your current billing or accounting package and IT systems are in compliance and also simplifies your reporting. Customers that choose to use an accounting software package that comes with automatic revenue recognition avoid inaccurate reporting with automated revenue recognition processes.
Related: How to Increase Profitability by Measuring Your Annual Revenue per Billable Employee
· Create a project timeline for implementing revenue recognition changes
Once you’ve identified the changes that you need to make if any, create a project timeline for implementing new accounting or IT systems, as well as, one for updating your accounting processes. Working closely with your auditor can help with ensuring that your revenue recognition methods are properly documented. An experienced accounting software consulting company such as CompuData, can also help your accounting software selection process, implementation and support.
· Train your staff and update key stakeholders
After you create your plan to get your business up-to-speed with the new revenue recognition standards, it’s essential to train your staff on any new changes that you implement in order to stay in compliance. Effective communication throughout the entire process especially for your staff that’s directly involved with your business’ revenue recognition practices can make a big difference in your ability to ensure that you are in compliance and have implemented the proper processes and procedures.
Click here to learn more about the new revenue recognition standard from the AICPA.
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