We’re not averse to piggypacking on published material, especially when it comes from members of our partner community, is a good read and, quite frankly, is in our wheelhouse.
Who besides a parent with sciatica doesn’t appreciate a good piggyback?
In an opinion piece for CFO.com, John McGaw and Jeff Johnson, leaders at EY with years of advisory experience, rather succinctly laid out how the new revenue recognition standard ups the complexity of revenue accounting to a level beyond ERP systems while simultaneously providing fertile ground for revenue automation now.
We couldn’t have said it better ourselves.
Here are a few excerpts from the piece, titled “Accelerating IT Planning for Revenue Recognition Changes.”
“Historically, ERP systems were generally not designed to perform complex revenue accounting…During the last 15 years, many ERP vendors added functionality to ratably recognize revenue over a period of time and even defer revenue recognition until a specified event was recorded in the system. However, most have not provided advanced functionality to accommodate changes introduced by SOP 97-2, EITF 08-1, or other revenue accounting changes” preceding the latest standard issued in May 2014.
“Clearly, companies are realizing the challenge (of the new standard) will not be solved by a couple of their bright accounting staff working a few long nights and weekends to devise a new spreadsheet. This problem is far more complex and affects downstream systems used for management reporting, financial planning and, potentially, other functions dependent upon revenue data.”
“If companies want to limit the extent to which they have to retrace their steps in 2018, plans and programs should be in place during the current year to perform and record revenue accounting for both current and future GAAP.”
To prevent the need for a lot of retroactive accounting of transactions, the authors plead for IT organizations to have already done their homework on software solutions providing new revenue recognition functionality. “Those teams should be readying to deploy projects to define and develop the system and business process changes necessary to automate the accounting for the new standard.”
For entities yet to develop such plans, this evolving and complex landscape will result in increased expense, staff and reliance in risk-afflicted solutions “until an automated solution can be implemented.”
Again, couldn’t have said it better ourselves.