BTerrell Group Blog

Transitioning to ASC 606? Which is right for you - modified or full retrospective?

Posted by Brian Terrell on Fri, Feb 23, 2018

Companies have two options when implementing the new Revenue from Contracts with Customers standard, codified as ASC 606. You can takeFull_or_Modified.jpg a retrospective approach or a modified retrospective approach. Both approaches require significant effort to account for contracts under both the old and the new guidance before and during the transition year, and clients with whom we’ve spoken express concern that this parallel processing is the greatest single challenge currently offered by ASC 606. Let’s take a quick look at each approach, and offer a few reasons why a company might choose one over the other. 

Full Retrospective

Under the full retrospective approach, you will determine the cumulative effect of applying the new standard as of the beginning of the first historical period presented, and you will recast revenue and expenses for all prior periods presented in the year of adoption of the new standards. If you are considering this method, you have zero time to waste.

Highlights and lowlights:

  • Your stakeholders and/or shareholders may demand it
  • Useful trend information can be had across all the period presented on your financials
  • You must recast previous financial statements as if the new guidance had always existed for a comparative two-year period prior to the adoption year
  • It’s likely to require significant time and effort
  • If contract volume exceeds even a handful, then finance and accounting automation beyond that provided by Excel spreadsheets will be a necessity

Modified Retrospective

Under the modified retrospective approach, you will apply the new standards to all new contracts initiated on/after the effective date, and, for contracts which have remaining obligations as of the effective date, you will enter an adjustment to the opening balance of your retained earnings account. Under this method you would not restate comparative periods in your financial statements. If you are considering this method, you have very little time to waste.

Highlights and lowlights:

  • Reduced effort in restating prior year amounts
  • No recasting of past revenue can speed implementation
  • Potential for “lost revenue” if the new guidance recognizes less revenue than the previous method would have in a particular period
  • Requires you to keep two sets of accounting records in the year of adoption in order to comply with the requirement to disclose all line items in the financial statements as if they were prepared under today’s guidance
  • Here too, even a modest number of contracts will demand more accounting and finance automation than Excel spreadsheets can reasonably provide

Regardless of which approach you select, you must endure a period of parallel reporting, where your accounting records must be maintained under both the current and new revenue recognition rules. This is likely to create data, process and system challenges that you should be solving now with the help of specialists in accounting, finance and ERP automation.

Remind me of those dates again

Public companies must be compliant with the new standard for annual reporting periods beginning after December 15, 2017 (i.e., January 1, 2018 for calendar year-end companies). Nonpublic entities must be compliant for reporting periods beginning after December 15, 2018 (January 1, 2019 for calendar year-end companies). 

Wondering what other companies are doing?

Various surveys have found a fairly even split between the two approaches, with public corporations tending to favor the full retrospective option and private enterprises favoring the modified option.

The takeaway? The best method for your company may be the method that most other companies in your industry are using. Ask your colleagues, visit trade shows, and consult with the pros before making your decision. But don’t delay.

By BTerrell Group, Texas- based Intacct Partner

Tags: RPA_Lead_Story

IDM: How Robots Can Automate Your Most Labour-Intensive Financial Processes

Posted by Brian Terrell on Fri, Feb 23, 2018

In a recent video interview , Forrester’s Craig Le Clair, VP and Principal Analyst for Robotic Process Automation (RPA), noted that the majority of investment he sees going into robotic process automation is in the area of shared operations like finance and accounting.

Forrester’s 2017 RPA Wave report says enterprises are under immense pressure to digitise operations, and most see RPA as part of their automation strategy to boost productivity with minimal process change, bring an easy-to-calculate ROI, and serve as a fresh alternative to the “big spend” of typical business process management programs.

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Tags: RPA_All

moderndiplomacy: Digital Controllership: Finance and Accounting Robotic Process Automation a Priority

Posted by Brian Terrell on Fri, Feb 23, 2018

In a recent Deloitte Center for Controllership™ poll of more than 1,700 finance, accounting and other professionals, 52.8 percent say their organizations plan digital controllership improvements—leveraging process automation, analytics and other technologies for financial and accounting processes—in the year ahead. Using finance and accounting robotic process automation (RPA) to increase efficiency and internal controls is the top priority for such efforts (34.7 percent).

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Tags: RPA_All

The new ASC 606 standard has some 'Gotchas'. Distinct or a Bundle?

Posted by Brian Terrell on Fri, Feb 16, 2018

The confusing complexities that just may come back to bite you

In our continuing series covering the major and minor points of the new Revenue Recognition rules contained within ASC 606, we wanted to shedGotcha.jpg some light on some of the nuances laced through the rules’ verbiage. While on the surface the rules sound fairly straightforward, there are some confusing complexities that it’s important for your organization to be aware of and to understand. Here we look at just one component of the rule – identifying the performance obligations of a contract - to illustrate how a seemingly simple concept gets a bit more complicated the deeper we look.

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Tags: RPA_Lead_Story

CMSWire: Busting 8 Robotic Process Automation Myths

Posted by Brian Terrell on Fri, Feb 16, 2018

A recent client summit at Doculabs surfaced some of the myths you’re likely to hear about RPA. The participants did some significant myth-busting, specifically around the following eight claims that are being made about RPA.

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Tags: RPA_All