“Revenue Touches Everything”

By Aarthi Rayapura November 17, 2015

“Revenue touches everything.”

For those in the throes of revenue accounting on a daily, monthly and quarterly basis, that pretty much sums up work in a nutshell, doesn’t it?

That over-generalized, yet perfectly-encapsulated, comment was attributed to Stephen Rivera, senior director of financial compliance and procedures for Johnson & Johnson Inc., at this week’s Financial Executives International (FEI) conference in New York, as reported in the Wall Street Journal.

In this context, Rivera was applying his comments to the eye-opening amount of effort in front of corporate financial departments tasked with evaluating, well, everything in advance of the sweeping changes coming in the form of new revenue recognition rules set to take effect in 2018.

“It’s like an octopus,” Rivera said. “It has tentacles all over the income statement.”

A colorful description, but quite apt.

To prepare for rule changes that will alter how companies report figures and much more, every organization must dig deep to re-evaluate everything from contracts to commission structures – in terms of both current and future revenue rules – in order to know, first, the extent to which their operating profit and income statements might be impacted and, second, what to do once they know.

As Rivera stated: “I can’t just move revenue in a vacuum. It’s not that simple.”

Corporate financial representatives and accounting experts at the event extended the focus of these in-depth financial re-examinations to include internal control systems used to prevent material misstatements around financial reporting as well as Sarbanes-Oxley-required control processes.