The New Revenue Recognition Standard – When to Start Implementation?

Implementing the new revenue recognition standard is a major challenge that many of us face between now and January 1, 2018 (or whatever fiscal year you have that begins after that date of course.) Many professionals are happy to be close to retirement at this point in time!

With the magnitude of the change in this new standard, including the significantly expanded disclosures which apply to everyone, when is the appropriate time to begin implementation efforts? This is a very complex question. There are still some moving parts as the FASB and IASB continue to make changes to the final standard. The new standard can have varying impacts across companies depending on such issues as complexity of contracts, how product is delivered, do you have software licenses, and principal versus agent issues, to name a few. While the TRG has addressed many issues, there are only a few left to be resolved. While this may seem to be a good sign, the SEC staff has stated concerns that there are not more issues being raised, attributing the low number as a sign that perhaps implementation initiatives are not far enough along or are not being elevated to the TRG (see the September 17th speech by Wesley Bricker, Deputy Chief Accountant in the SEC’s Office of Chief Accountant at: http://www.sec.gov/news/speech/wesley-bricker-remarks-bloomberg-bna-conf-revenue-recognition.html)

There is much discussion about when to begin implementation discussions. To date there has not been much hard data about what companies are actually doing. The Financial Executives Research Foundation (FERF), which is an affiliate of FEI, and PwC have teamed up to survey companies about this issue.

As nearly as we can tell, this is the first really good data about where companies are in the implementation process. You can find the study at:

www.pwc.com/us/revrecsurvey

The survey deals with a number of issues surrounding the impact and implementation of the new standard. It is a good read, and worth spending some time digesting. Here are a couple of things to ponder while you read.

  1. Do you have a reasonable understanding of how the new standard will affect your accounting and disclosure?
  2. What resources will you need in this effort?
  3. What level of organizational involvement across functional areas will be necessary (e.g., sales, legal, etc.)?

As always, your comments and thoughts are welcome!

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