One option is to look for a silver lining and consider how the change might be beneficial to you. This approach can be straightforward in some cases – i.e., relocating could open up fresh personal/careers opportunities in your new home – but much more difficult in others, such as getting accustomed to the complexities of ASU 2014-9, ASC 606 and IFRS 15.
There are definite benefits to moving to these revised rev rec guidelines – the challenge is in actually attaining them. Leaving behind legacy spreadsheet-driven financial processes is a good place to start, so you can transition to cloud accounting software better-suited to the modernized rules.
How SMBs can benefit from the rev rec revisions
There are several key differences between old and new rev rec rules, which in theory should be good news for businesses:
- A single, comprehensive recognition model, based on IFRS 15, is replacing the tangled mess of industry-specific guidance that was a hallmark of GAAP.
- Revenue recognition no longer needs to be performed on cash receipt, under the updated standards.
- The rules heavily emphasize single contracts, spelling out in detail the liabilities and performance obligations that must be applied to each one.
In practice, though, transitioning to the updated rev rec model is not easy, at least not with common tools of the trade such as Excel and QuickBooks. The potential benefits outlined above quickly get lost as finance teams scramble to see how the new rules affect their operations.
For example, a SaaS vendor now has to consider the possible effects on timing of revenue recognition for software licenses, why extended payment terms might no longer preclude recognition, how contract reevaluation could change product pricing, etc. While dealing with these considerations, accountants also have to wade through tons of spreadsheets that may contain outdated, wrong or poorly formatted data.
Managing the rev rec transition requires clear insight into trends.
The saying "you're missing the forest for the trees" is meant to convey the idea of overlooking the big picture because of close-up details. Something similar is happening with rev rec transitions, in which accountants are missing the rev rec shift (and its benefits) because of their spreadsheets.
How to better navigate the rev rec transition
Instead of getting bogged down with manual activities, finance teams can tap into the automation capabilities, integrations and clear insights provided by a solution such as Intacct. Supported by reliable cloud-based infrastructure, Intacct provides sophisticated revenue accounting for moving from the old guidance to the new.
"Dual reporting solves one of the biggest problems of the rev rec shift."
In Intacct, dual reporting makes it possible to account for billing, expenses and revenue under both systems, solving one of the biggest problems of the revenue recognition shift. The compliance clock is indeed already ticking for many organizations that must perform dual reporting on their contracts. Cloud financial software makes the process much less stressful.
By working with a partner like RKLeSolutions, you can get the maximum benefit during the transition phase. RKL will help you come up with a specific roadmap from implementation to education and training, so you can solve your biggest accounting problems with automated software rather than risky spreadsheets.
