No Time Like the Present: New Revenue Recognition Principles Require Attention Now

by FEI Daily Staff

6 key considerations to help spur those still on the sidelines to get in the game.


At long last, the effective date of the FASB's new revenue recognition standard is almost upon us. We now have less than a year to put these principles into practice, yet many financial reporting professionals have not yet begun the (somewhat) tedious steps necessary to implement the new standard. These steps are beyond just identifying how the accounting will change; these are the steps to actually implement changes within the organization to address those accounting changes.

All organizations should expect some level of change (if for no other reason than the significant increase in disclosure requirements).  The process to determine the level of change can be significant and complex, create challenges across an organization, as well as externally with key stakeholders such as analysts and auditors. A proper implementation process requires immediate attention, changes must be sustainable going forward, and both can result in the need for additional effort and resources both currently and in the future.

To help spur those of you still on the sidelines to get in the game, I wanted to share six key considerations that I’ve been speaking to companies about – and which were also discussed at the recent AICPA conference in Washington, D.C.:

  • Carpe diem! It bears repeating: for those who haven’t yet started, the time is now. You will not regret focusing on this process sooner rather than later. And if you’ve started, keep moving ahead to ensure sufficient time to complete this effort!
  • Internal controls and disclosures. Be sure to focus on internal controls, both during the transition process and subsequent. This includes controls around things like disclosures, of which there are plenty required! Make sure you understand that changes may be needed for disclosures alone, such as within the entity’s IT system.
  • Document, document, document. The transition from a rules-based to a principles-based process can feel awkward, as there’s more judgment needed when applying principles as opposed to detailed rules. To keep yourself and your organization on solid ground, be sure to document your decisions as they’re made (including the rationale).
  • Communicate. Applying the new standard will lead to new complexities and different judgment calls than today’s guidance. Open communication is essential both within your organization and with your auditors. In particular, discuss transition strategy, accounting judgments and process changes with your auditors to ensure there are no surprises later on. Industry working groups and regionally-based roundtables have provided excellent forums for identifying technical and operational issues and sharing thoughts. During these early days, everyone is on a steep learning curve, so sharing information is extremely helpful.
  • Get help. If you aren’t sure how to implement aspects of the new standard, resources are out there to help. Examples include peer sharing, the FASB technical inquiry hotline, audit firms’ interpretive guidance (there’s already a lot available with more to come as we move forward in 2017), and even SEC pre-clearance. 
  • Take a fresh look. Bottom line – this is new. Transitioning to the new standard can feel a bit overwhelming, but it also provides an opportunity to start fresh in some respects. Take the opportunity to think differently about your approach to recording revenue, maximize use of IT systems, and even reconsider outdated aspects of your contracting.
Implementation is not going to get any easier with the passage of time; in fact, it’s likely to get harder as the time to complete a host of tasks becomes more and more compressed. The more you can get behind you now, the better off you’ll be in the last half of the year!


Dusty Stallings is Partner, Capital Markets Accounting and Advisory Services at PwC.