January 1, 2018 is looming overhead, and with it comes the new revenue recognition standards passed nearly three years ago. Is your company ready for and compliant with the changes? Use this insight to work through adopting the new rules.
“Keeping the accounting team complaint is critical to the long term financial health of a company. Check in with your accounting firm regularly to make sure your up to speed on current changes with the law!” says Sharon Tsao, EVP, Contemporary Staffing Solutions.
The New Standards Are Based On Principles
The new standards move away from a rule-based model so now companies must use sound accounting judgment in certain situations. For example, will you estimate variable consideration at the start of an engagement? Will contract options be accounted for as a material right? The right decisions will vary from company to company; the key is to document extensively to show how you applied the principles of the new standards for audit.
Know the New Standards For Your Industry
There are industry-specific issues that every company must be on top of, including:
- Media: Changes to license revenue recognition can be confusing. Some license will be impacted, others will not.
- Financial services: Revenue recognition from financial investments like loans and securities will not change but revenue from contracts with customers like fees and private equity investments will be impacted.
- Automotive: This industry will have to replace all current revenue recognition standards and adopt new accounting methods for preproduction. Additionally, revenue from lease purchases may be impacted by the new standards, depending on the market value of the vehicle and the repurchase price.
- Retail: This industry will be impacted significantly because of things like coupons, rebates, freebies, price protection, price matching and other customer incentives. Revenue recognition from rewards programs will be later than previous years, but gift card breakage income will be faster.
- Technology: Areas like extended maintenance contracts for hardware, consulting, and vendor licenses will have new revenue recognition standards.
- Industry and manufacturing: Multi-step transactions with distributors will fall under the new rules.
Work Closely With External Auditors
If you don’t have strong communication with your external accounting team, you will run into trouble next year. External authors have a lot on their plates right now, as well. They have to audit your technical positions, evaluate your accuracy at the start of retained earnings adjustment, understand your process and methodology for adoption and evaluate your organizational controls in order to keep you compliant. Keeping them in the dark will only serve to complicate matters down the line.
Don’t assume that your team is on schedule in terms of adopting the new standards. If you haven’t checked in lately, or if you think the team is behind, stop what you’re doing and taken stock of the situation. Make sure that your resources, objectives and work streams are aligned and moving in the right direction. You don’t want any surprises come January 1.
Get The Right Team In Place
Navigating ever-evolving accounting rules and regulations can be a challenging and often frustrating process. It takes the right professionals to ensure compliance. If your company is seeking top accounting and finance talent, or you want to improve your accounting and finance hiring processes, contact the expert A & F recruiters at Contemporary Staffing Solutions today.