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

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.

Read more.

Tags: RPA_Lead_Story

The Who, What and When of Revenue Recognition Standard Updates

Posted by Brian Terrell on Tue, Feb 06, 2018

Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, is provoking a lot of questions—and for good reason. The who_what_when.jpgupdate essentially affects all businesses and requires some major updates to reporting and accounting practices. Read on to see if it applies to you, what you need to do, and when you need to make the necessary changes.

WHO is affected?

If you have contracts with customers for the transfer of goods and/or services, even if they are of the non-financial sort, this update will affect your business.

Read more.

Tags: RPA_Lead_Story

Are you Prepared for Upcoming GAAP Revenue Recognition Changes?

Posted by Brian Terrell on Mon, Jan 29, 2018

Back in 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) released new guidance onRev_Rec2.jpg recognizing revenues in contracts with customers. Revenue recognition is essential for strong financial management and yet can be challenging for certain types of businesses, such as those managing recurring and deferred revenue.

As indicated in “Why Did The FASB Issue A New Standard On Revenue Recognition?,” posted on, the proposal of new revenue recognition guidelines by the FASB and IASB were intended to clarify the reporting of financial statements that include the nature, timing, and uncertainty of revenue generated by certain types of contracts starting in 2018 for public companies and 2019 for private companies. 

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Tags: RPA_Lead_Story

A day in the life an RPA bot

Posted by Brian Terrell on Fri, Jan 12, 2018

Let’s say you’re an overworked sales manager for a growing widget manufacturer with annual sales in excess of $50 million.shutterstock_146587283.jpg

You’re a hard worker (okay the hardest working person in the company) and you’ve just been notified on a Saturday morning that a $100,000 sale came through the website. You go to the office and check the accounting system and yes indeed the order was placed at 2 a.m. You check the CRM system and yes the new customer’s info has been correctly entered. To your even greater delight, the sale was entered in the ERP system.

But wait, who entered the info correctly in the three systems that don’t talk to each other? You’re the only person in the office. It’s hard to imagine any of those young sales guys giving up a Saturday morning. And who notified you?

Then you remember the company’s newest member – the RPA robot – a virtual system that can move data between systems that the IT department said could never be integrated. Without any grumbles, the robot has monitored the website, accurately copied data, looked up customer info, and notified you before you had your first cup of coffee. Better still, the robot won’t ask for time off, call in sick or grumble about impossible hours. You happily give him the title of being the company’s hardest worker.

Here’s how you can get to this state of Saturday morning bliss.

Tags: RPA_Lead_Story