Revenue Management Criteria: What will the post-FASB update world look like?

The clock is ticking on the transition period for the new revenue recognition rules and revenue management strategies. Updated standards from the Financial Accounting Standards Board and the International Accounting Standards Board will apply to public companies at the end of 2017, and private ones in December 2018. Accountants can expect significant changes from the numerous industry-specific rules previously grouped under Generally Accepted Accounting Practices. A comprehensive five-step process, codified in ASC 606, will soon take their place.

What the accounting world could look like after the FASB/IASB shift

Perhaps the most important change in ASC 606 is a renewed focus on individual contracts, which will have several key effects:

• There will be no more revenue recognition upon cash receipt.
• Reallocations will be required for contract changes.
• Expenses will be deferred on a more regular basis.
• Recognition may still be needed even with extended payment terms.
• Dual reporting on contracts will be essential for contracts that begin under the old rules but end under the new ones.
• Revenue recognition for software licenses and subscriptions will be subject to new timing.

These specific changes are just the tip of the iceberg. Although ASC 606 on the surface looks like a radical simplification of the revenue recognition process, in truth, it will strain the various coping mechanisms that finance teams have used to recognize revenue and run reports. Accountants have long relied on Microsoft Excel sheets along with desktop software such as QuickBooks to handle their finances.

However, using these tools to keep up with the billing, accounting, and forecasting for all contracts will be increasingly difficult under the updated FASB/IASB rules. Numerous spreadsheets will be required, heightening the risk of data entry errors and discrepancies. Accountants will waste precious time hunting for the truth and trying to close their books each month.

Plus, reporting must be done under both sets of rules until the deadlines pass. This necessitates a more advanced software solution than many organizations currently have. Instead of spreadsheets and manual processes, they now need cloud financial software such as Intacct.

ASC 606 creates new complexities for finance teams.

Make a better revenue recognition transition by switching to Intacct

Cloud software offers deep automation instead of manual tedium. It provides a seamless solution for the entire cycle of subscription billing, revenue management, expense management, and reporting and analytics. You can manage each customer contract with confidence, from initial configuration, pricing, and quoting to ordering, billing, and recognition.

"Cloud software offers deep automation instead of manual tedium."

Organizations can also benefit from Intacct's numerous integrations with industry-leading software, such as Salesforce for customer relationship management. Intacct helps break down the siloed legacy accounting systems that would otherwise complicate compliance with the new IASB/FASB rules. Teams can run customized reports and analyze contracts side by side in Intacct.

RKL is here to help as you make the transition throughout 2017, 2018, and beyond. We can assist with discovery, implementation, ongoing education, and much more. Learn more about our expertise in contract and revenue management and contact us to get started.