ASC 606 / IFRS 15 Changes Aplenty for Subscription Businesses

By Aarthi Rayapura March 28, 2017

Do you subscribe to the theory that change is good?

Ehhh, ‘yes,’ ‘no,’ or even a ‘depends on my mood,’ any answer is fine with us. We’re simply wedging in use of the word ‘subscribe’ to highlight our recent article in partnership with our friends – and frequent collaborators – at Zuora for FEI Daily on some key changes coming down the pike for subscription-based businesses to consider.

Everyone can expect impact in some fashion from the impending new revenue recognition guidance, but businesses built on a subscription model will be hit more than most. New challenges in the form of new data requirements, pricing structures, price billing models and accounting needs are mounting for these businesses dedicated to long-term customer relationships rather than one-time transactions in isolation.

“Quite often, prior to the formal assessment, there is a false perception (particularly by the private companies) that the impact of the new revenue standards may not be material enough to justify the sense of urgency in dealing with it,” said Peush Patel, Zuora’s Product Management Director, on why so many firms remain stuck in early phases of new guidance adoption. “But once these subscription businesses perform the full assessment, they realize that certain business processes and the related IT applications need to be revised to ensure continuous compliance.”

In the piece, penned jointly by Patel and Jagan Reddy, Leeyo’s Co-founder, CEO and CTO, and titled “The Top Five Changes in ASC 606/IFRS 15 for Subscription-Based Businesses,” the duo swiftly boil things down to a manageable number for consideration, including – but not limited – to:

  • The definition of a performance obligation
  • Usage-based pricing
  • Subscription amendments

Check out the full article to learn more on these and other items well worth your consideration.