Field Dispatch Backs New Guidance Adoption Turbulence

By Aarthi Rayapura March 22, 2016

We make it a point to not just be on top of critical revenue recognition conversations, but deep in the middle of them. You don’t become the industry leader in automated solutions compliant in IFRS 15 and ASC 606 or call yourselves “The Revenue Experts” without that mentality.

The heady conversations of today swirl around confusion over adoption timelines for that new revenue recognition guidance. It’s the reason we tackled the topic early on in our “Ask the RevRec Experts” podcast and feedback from our folks in the field indicate the passage of time hasn’t eased the turmoil.

To illustrate this fact, consider the real-life example of a company in the technology sector with a September year-end and a heck of a lot of internal perplexity between the accounting folks and financial IT team regarding their new guidance adoption date. Some thought it was October 2017, others thought it was October 2019, while a start date of October 2018 is correct. It’s easy to understand how elements of ‘bad math,’ fiscal versus calendar dates, and creative thinking can creep in and provide a difference of opinion.

Granted, the nature of this company’s business makes them a bit unique in terms of adoption, with several months longer than a lot of folks, due to where their fiscal year falls. They also have complicated contracts spanning decades with plenty of potential for new guidance alterations.

This company’s internal struggle to understand when to adopt, however, is not unique. If it were, we wouldn’t be hearing variations of this situation time and again. And again.

Last year’s announcement of a one-year delay in the new guidance effective date does give companies the time to know exactly where they are and when they will be required to adopt. Companies with a fiscal year not matching up with the calendar year are saddled with an extra layer of complexity in determining this.

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For those on a calendar year, they need to start reporting under new guidance in January of 2018. While others on a fiscal schedule may have a few more months, they still may need that time to collect data and get their reporting in order, depending on their adoption method.

It’s important to distinguish the difference between the time when your firm needs to start gathering data under the new guidelines and when it is time to start reporting under the new guidance.

We want to help you untangle the complications around timing, and give you as much time as possible for your implementation. To that end, we strongly recommend starting your adoption effort sooner rather than later to be sure all your data, reports, controls and upstream systems are in order. If you find they aren’t, you’ll be ahead of the game with plenty of time to correct and proceed.