Frequent visitors to this space have read ad nauseam about the need to start planning efforts for the new guidance, how that’s clearly not happening and how we can help. You get it, right? Preparation needed to start yesterday.
Today, however, we’re talking early adoption. Who is properly thinking about what’s to come and how best to get all their ducks in a row?
Corporations deep in the weeds (yes, it’s “Fun Turn of Phrase Tuesday”) on the transition to the new revenue recognition guidance and revenue automation are most likely existing or onboarding RevPro customers.
The converged revenue recognition guidance, ASC 606, “Revenue from Contracts with Customers,” jointly announced in 2014 by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), was a decade in the making. For nearly that long, Leeyo Software has been preparing for its arrival. We’ve closely followed development every step of the way to understand how the new standard’s five steps mapped into our signature product, RevPro, and ultimately incorporated into what would become RevPro3, released in 2015.
As a company, we were proud to be the true first to market with an automated revenue management solution in support of ASC 606 and IFRS 15.
This level of planning on the part of Leeyo has allowed those few forward-thinkers to incorporate RevPro into ASC 606 roadmaps.
“Our approach to ASC 606 has been to update existing policies in order to comply with the new revenue standard while utilizing RevPro to operationalize the changes necessary to successfully adopt,” said Emily Daigle, ASC 606 Program Manager for EMC. “We’ve incorporated the RevPro implementation into our adoption project timeline to help facilitate the disclosure requirements of the new standard as well as to automate revenue recognition under the new guidelines for 2018.”
Those in the field tasked with providing assistance to companies ahead of the curve on the new guidance concur.
“My clients are implementing RevPro to automate revenue accounting for the ASC606 standard,” said a longtime revenue accounting consultant from one of the Big 4 firms. “RevPro’s functionality is ahead of the competitive software offerings and the architecture will allow us to reprocess FY16 and 17 transactions to support full retrospective adoption by mid-2017, providing adequate time to validate the results and build confidence in the solution prior to the adoption date.”
For one software company which recently went live with RevPro3, needs matched benefits during an ASC 606 initial impact assessment all too many corporations have yet to accomplish.
A representative of this company noted during this assessment, “we identified that an automated solution to assist SSP valuation effort is necessitated due to a large volume of distinct product codes and significant variability in pricing.
She added: “The user case study and demo from Leeyo indicated that RevPro 3 SSP Analysis is a repeatable and scalable solution to assist our SSP valuation and thus we implemented RevPro3 SSP in April 2016.”
Functionality in RevPro3, designed to support the more complex, principle-based approach to revenue recognition of ASC 606, includes:
- Dual reporting – simultaneous support of multiple accounting books
- Performance Obligations (POB) – identify and manage POB-based revenue
- Transaction pricing – determine price, including variable consideration
- Contract costs – track and account for additional revenue contract costs
- Reporting – enhanced reporting tool to allow for personalized reporting, forecasting and dash boarding
The revenue manager for another technology firm which recently upgraded to RevPro3 said all the folks in his shoes (see: “Turn of Phrase Tuesday” comment) will be expected to maintain multiple books these next couple years for the new standard. He wanted to get as early a start as possible and take this time now to test methodically and iron everything out. He appreciated that RevPro3 allows users to process across books from one data import, either independently or in direct succession.
Sadly, stories like this remain the exception, not the rule.
A recent Compliance Week account of its annual conference noted the most sparsely attended session was the one on the new guidance. Based on rudimentary feedback to come out of that session, most companies still haven’t decided on an adoption method and/or done an initial assessment.
“The results are somewhat—I wouldn’t say surprising—maybe alarming,” said Chris Chiriatti, managing director at Deloitte & Touche, in the Compliance Week article.
“It’s an indicator that many companies view this as 18 months from now,” added Eric Knachel, senior consultation partner also with Deloitte.
Well, at least not all companies view it that way.