We’ve talked ad nauseam in this space about the upcoming change to the governing rules for revenue recognition, but with ASC 606‘s effective date for public companies less than six months away, corporate finance leaders are rightfully freaking out. You know who become the ultimate beneficiaries? Consulting firms.
That’s a key takeaway from a recent Big 4 survey-laden report from MarketWatch based on feedback from an industry conference in June.
Company CFOs and the like who underestimated the effort, expense and wide-ranging impact of the new standard are paying the price – quite literally, in most cases – for aborted attempts to manage the sprawling adoption internally. As midway deadline after deadline is missed, the realization external technical expertise is necessary means accounting firm resources offering such expertise are in high demand, while many potential clients are out of luck as well as out of time.
A late 2016 survey from PricewaterhouseCoopers (PwC), “2016 Revenue Recognition Survey,” indicated at that time companies which were trying to leverage internal resources for the effort were already finding it difficult to secure outside help.
“As the effective date gets closer, this situation may become more acute and available outside assistance may be limited,” according to that PwC report.
Consider the situation today to be of a highly acute nature.
Also noted in the MarketWatch article: Money spent on these revenue recognition projects is quite significant. An audience poll taken during a recent PwC webcast indicated more than a third will end up forking out between $500 thousand and $5 million for the effort.
An even more recent article, also from MarketWatch, did a deep dive on the impact of ASC 606 on the auto industry and came up with a myriad of feedback, ranging from a potential $1 billion impact for GM to a rather small impact footprint for Ford and just about everything in between.
Another interesting tidbit turned up from some MarketWatch research showed a handful of corporations utilizing their Big 4 auditor – Deloitte, KPMG, PwC, or EY – for additional services to support preparation for adoption of the new standard. As noted in the piece, depending on the type of work performed by the audit firm, an independence issue could come into play.
However, all the Big 4 firms have strongly recommended heavy involvement by a corporation’s audit firm as part of a successful implementation of the new guidance.
“A successful implementation requires early and collective discussions between the company’s departments, its auditor , and its advisors,” as stated in Deloitte’s “A Roadmap to Applying the New Revenue Recognition Standard.”
No matter how you slice it, a time of struggle and frantic panic by corporate finance teams is keeping auditors and consulting firms plenty busy these days.