The new revenue recognition standard is being converted into a single model across all industries. The new global framework for revenue accounting has numerous challenges for companies including: Application and Controls. Application was described in the previous blog post.
Application of ASC 606 is a major issue for businesses impacted by the new revenue recognition rules. Most companies seem to be generally familiar with the new revenue recognition standard; however, there are specific areas within the rules are vague. Many are left with wondering how the new revenue recognition rules will impact their business. This causes major challenges and risks for any business that doesn't take the time to fully understand how ASC 606 and IFRS 15 affects their operations.
As 2015 comes to a close, were reflecting on all of the exciting revenue recognition standard and awesome tips that we published on the Softrax Blog this year. Did you catch these most popular blog posts on our Softrax Blog? We've compiled them below.
The new revenue recognition rules are daunting and many companies wonder how they will be impacted by ASC 606. What really happens to companies if they don't comply with the new revenue recognition rules? Who enforces these rules? The reinvigorated regulatory agecny, the SEC takes action on improper revenue recognition accounting. Learn about the SEC's role with revenue recognition and how to avoid improper revenue accounting.
Companies will be required to adopt a new universal framework for revenue recognition – one that will hold regardless of vertical, product or service. Currently we have two different standards US GAAP and IFRS 15. The US Financial Accounting Standards Board (FASB) and its international counterpart, the IASB, have spent a significant amount of time reassessing their respective principles and decided to standardize revenue recognition into one common standard – ASC606.
The idea of the ‘perfect storm’ was first popularized by journalist Sebastian Junger in his book of the same name, set against the backdrop of the devastating Nor’easter of 1991. Though undeniably destructive, it was the origin of Junger’s storm that caught the public imagination: a chance combination of high-pressure systems, low-pressure systems, and tropical moisture, it showed that three unrelated phenomena coming together at just the right moment could spark a $200M disaster far greater than the sum of its parts.
It’s an apt metaphor for the challenges US businesses currently face, created – like that fateful Nor’easter – by a collision of three separate processes:
In the months since FASB and IASB released the finalized update to their revenue recognition guidance, both boards have seen significant pushback on the effective dates and timeframes for this far-reaching new standard. Last month, FASB Chairman Russell Golden announced that the board was in the process of researching whether implementation deadlines for the guidance – originally scheduled for 2017 and 2018 for public and private organizations, respectively–needed to be pushed back.
When the US Financial Accounting Standard Board (FASB) released its updated revenue recognition guidelines earlier this year, it also spotlighted several industries likely to see substantial impacts from the new ASC 606 guidance. One the most notable verticals on that list: telecommunications.