Prepare for the New Revenue Recognition Standards
Ready, set, go: The deadline will be here sooner than you think.
The new revenue recognition standard set forth by the Financial Accounting Standards Board (FASB) in May 2014 must be applied to annual reporting periods beginning after December 15, 2017. These new standards constitute a major change for many businesses.
If you’re an accountant in a small business, implementing the new standards means you’ll want to communicate with others in your firm about how practices will need to change. If you run your own accounting business with multiple clients, you may be preparing for the transition with your staff as well as communicating and implementing it in collaboration with your clients.
Recent surveys of accountants and other financial executives have shown that more than half of those surveyed had not yet decided on an implementation method for the new standards, which will affect not only their processes, but also how many years of data they need to process. Here’s what the American Institute of CPAs (AICPA) recommends as you move ahead:
Enlist a task force. The new rules apply to an already complex and difficult area of accounting. By assigning select staff to an internal task force, you can help ensure that all necessary changes are properly managed.
Evaluate the changes needed. Possible changes could include not only how you calculate your clients’ existing revenue streams, but also how the new accounting affects a company’s other financial business, including but not limited to how they record and report compensation plans, taxes and metrics.
Keep track. While you perform these evaluations — and, indeed, throughout the process — be sure to document your analyses and recommendations.
Review legal language. Determine what disclosures you may need to make in the case of retroactive or interim application of these upcoming standards.
Assess your software and IT needs. Your software and other digital solutions should have capabilities to support these changes and provide tools to help your business through it. Check with the manufacturers to make sure that’s the case. Ask if they offer software solutions to help you apply the new standards retroactively. Check to make sure your digital solutions feature all necessary disclosures.
Train your staff and inform stakeholders. Once you have a process in place for applying the new revenue recognition standards, be sure to include your staff in training, both on the guidelines themselves and any new processes (including software), that will help as you move ahead. If your clients need to be updated, schedule training for them as well.
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