Light the fire: Private companies and the new revenue guidance
WHITE PAPER |
We believe many middle-market companies, especially contract-intensive companies, will need to dedicate significant resources to properly assess and implement the changes brought about by Topic 606, Revenue from Contracts with Customers, of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC). Because compliance may be more challenging than many believe, it’s time for private companies to “light the fire” of urgency with respect to implementing ASC 606 and “burn” three myths:
- Adoption of ASC 606 will have no financial statement impact, other than disclosures.
- The new disclosures just require a little more writing at year end.
- It won’t take that much time to work on the implementation of ASC 606.
Our whitepaper, Light the fire: Private companies and the new revenue guidance, summarizes the impact of ASC 606 on some familiar public companies as disclosed in their SEC filings, and demonstrates that private companies should light the fire of urgency with respect to implementing ASC 606 because, among other reasons:
- The degree of change to a specific entity’s revenue recognition policies and the effects the changes have on the entity’s financial statements will vary depending on the nature and terms of the entity’s revenue-generating transactions.
- ASC 606 includes comprehensive new required quantitative and qualitative disclosures.
- Increased judgments and estimates will require increased processes, controls and documentation, as well as potentially significant changes to existing information technology (IT) systems.
- There may be a need to hire or train people to be involved with the implementation effort.
- The new standard requires the coordination of legal, finance, treasury, IT, tax and operations departments within an organization.