The CFO Guide to Revenue Recognition
Both public and privately held companies should be ASC 606 or IFRS 15 compliant.
For most organizations, implementing new standards is a complex project that demands significant planning and coordination. This must-read CFO guide outlines challenges and solutions as you transition your organization to the new standards, and how a cloud application can help position your company for a smooth, successful changeover.
- How the right cloud application can help your company transition smoothly
- Common mistakes that can spell disaster at any part of the transition process
- Three major pain points that companies are factoring as they prepare for the new standards
What is the Impact of ASC 606?
The rule, “Revenue from Contracts with Customers” standardizes and simplifies how companies record revenue in customer contracts. Effective for fiscal years beginning after Dec. 15, 2017, it covers how businesses report the nature, amount, and timing regarding contracts with customers.
The impact might not be as significant for companies, such as retailers, that sell products and receive revenue at one time. But for companies that sell recurring services like subscriptions or licenses, the rule may improve the results.
Under the previous law, if a company for example, sold a 12-month software product license, it could apply only six months of revenue to its books. It would not be able to count the next six months of revenue until the following year. But under ASC 606 it can count all the revenue at once.
Implementing ASC 606 also has broad ramifications. Meeting the standard will impact not just your accounting and financial departments, but will impact your IT systems, HR policies and more. It’s these broader implications and unknowns that have many companies concerned.