How Midmarket Enterprise Can Meet ASC 606 and IFRS 15 Compliance with Revenue Recognition Software
The changes introduced by the new Revenue from Contracts with Customers standards (codified in ASC 606 and IFRS 15) has many companies scrambling to obtain compliance. The shift has the potential to disrupt multiple aspects of your operation, and also provides an opportunity to hone and improve your operations, incorporating best practices and lean principles.
As is true with most business mandates, meticulous recordkeeping and a robust audit trail are central to compliance. Modern ERP solutions like cloud-based Intacct are designed for the task. With inherent flexibility and configurability, Intacct helps companies navigate the complexities created by ASC 606 and IFRS 15, achieve ongoing compliance and get back to doing what you do best.
Taking the first steps toward compliance
Compliance with the new revenue recognition standards is rooted in five steps. While the steps seem clear and straightforward, there are a myriad of nuances, interpretations and complexities behind each.
- Identify the contract with the customer
- Identify the deliverables
- Determine the transaction price
- Allocate the transaction price to the deliverables
- Recognize revenue when you satisfy/deliver a deliverable
You can read more about taking the first steps here.
Is Your Technology Up to the Task?
There are several critical functional areas your technology should be excelling in – in order for you to obtain and retain compliance while continuing to grow your successful business. The integration of fundamental business functions, process automation and detailed business insights and analysis are key elements in any business management solutions, and become vital when your goal is compliance with ASC 606. We discuss the technology you’ll need to obtain and retain compliance here.
Industries impacted by revenue recognition changes
ASC 606, the revenue recognition update from the FASB entitled Revenue from Contracts with Customers, affects most every business dealing with contracts in some way.
That said, there are a few industries that will have to make more modifications than others, whether it be the timing of their services or the nature of their products. Telecommunications, healthcare, aerospace, construction, asset management, real estate and software industries should pay special attention to the new guidance. For example, contractors will need to disclose both quantitative and qualitative information in their financial statements when the services are rendered or upon completion of service. We take a deeper dive into how the update affects SaaS companies here.
Just what is an engagement?
To comply with ASC 606, the new revenue standard, your firm may literally have to change the way it does business. And it all starts with the terms of your engagements. You’ll need to be able to define:
- What exactly are you delivering?
- Is it distinct or a bundle? (And what’s a bundle?)
- What’s the transaction price? (Sounds simple, but there are some gotchas.)
- Are you the principal or the agent? (And what’s an agent?)
- When is it considered done?
You’ve got questions about revenue recognition changes
ASC 606, Revenue from Contracts with Customers, represents the most sweeping accounting changes to hit companies in decades. Whenever there are changes this significant, there are bound to be questions. BTerrell can be your resource in researching, answering and implementing solutions to the questions you face. We’ve assembled a list of some of the commonly asked questions (and their answers) here.
Where to begin – let’s start the conversation
There are a number of action steps you can be taking now to ready your firm for the transition. Read about those steps here. And when you’re ready to move forward, BTerrell Group specializes in helping organizations meet the challenges like those associated with the new revenue recognition standards. We’d be pleased to help you evaluate your current business management solution, research the options for a new one, and support you during the transition. Contact us for a free consultation.
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