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.
Once your company reaches a certain size, ERP and financial systems become indispensable in your day-to-day operations. However, the more tightly you integrate these systems with your business processes, the harder -- and more expensive -- it becomes to upgrade or replace them.
In an effort to streamline and update the revenue recognition process for businesses, the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are in the final stages of converging their separate standards for revenue recognition cycles into a single standardized and improved model.
In fact, for many businesses—both new and old—subscription-based contracts have become the norm. If you need proof of that, look no further than the software industry. Software was once a physical product: if you wanted to purchase a copy of Microsoft Office, you would pay Microsoft, and Microsoft would deliver you a CD (or in the older days, floppy disks) with the application on it.
In many ways, spreadsheet applications like Microsoft Excel are the backbone of the business world. With a little ingenuity, they handle everything from project management to employee expenses -- the ideal tool for companies that may not be ready to commit to a full-blown ERP system.