Certain changes are necessary to adopt the new revenue accounting standard. Will these changes lead to strategic and operational opportunities? Will they impact or create new revenue models that affect your growth strategy? Will you use those required changes to automate processes, improve internal controls, and drive efficiencies?
To begin, companies must evaluate current revenue policies against the new requirements and, in addition, analyze existing and future contracts to determine the appropriate revenue recognition model under the new standard. Organizations must also provide training across all business functions to ensure that the implications of the new model are understood—from contracting and budgeting and forecasting to incentive pay and tax planning considerations. Processes and systems will likely require changes, and internal controls will require careful analysis. Companies should take into consideration the resources required to understand, plan, evaluate, mobilize, and implement the new standard. In addition, they must develop new policies to facilitate the expanded disclosure requirements and increased judgments.
The impact of the new revenue model is significant. Those companies that have planned ahead—the strategic thinkers and industry leaders—will not just get it right but also find strategic and operational opportunities. Smart planning and tactical thinking will result in ROI.
Developing an understanding across the business results in collaborative input. In turn, collaborative input drives forward-thinking and better business strategy—done well, you will create new opportunities and address existing needs.
Questions to Ask Your Organization
BOARD OF DIRECTORS: Does the entity have a plan for timely compliance with the new standard?
LEADERSHIP TEAM: Does this create opportunities to re-examine revenue strategy and business models and expand our services and product offerings?
CFO: What changes in the company’s financial reporting are required, and what are the impacts and opportunities of those changes on the supporting policies, processes, and controls due to the new standard?
CIO: Where will we source metadata to support external and management reporting that is consistent and equips leadership with the right intelligence?
GENERAL COUNSEL: Are changes to contractual terms necessary to achieve our new revenue strategy, business models, or product and service offerings?
HUMAN CAPITAL: Does the company’s pay and benefits philosophy for variable sales compensation need to shift due to changing accounting treatment of such costs?
Want to know more about the new revenue standard? Read part 1 of this blog series.
Download our guide on ASC 606
Whether or not you’ve implemented already, our guide provides you steps in the right direction.
WHAT’S IN THE E-BOOK
Identify the strategic opportunities in compliance
- How to engage and educate stakeholders across your company
- How to meet unexpected challenges: the value of a dedicated project manager
- How to build a path to compliance before your company’s reporting deadline
- Why you need a customized adoption plan
Get up to speed on revenue recognition
Several methods may lead to compliance with the new ASC 606 revenue recognition standard, but only one is best for your company’s future growth. See how we can help you adopt ASC 606 by the fast-approaching deadline for private companies.