GENERAL EDITOR Philip W. Miller NSAC Assistant Education Director (804) 339-9577 pwm01@comcast.net ASSISTANT EDITORS Greg Taylor Williams & Company 806) 785-5982 gregt@dwilliams.net
By Phil Miller, NSAC Assistant Education Director
WARNING: IT’S CRUNCH TIME FOR PRIVATE COMPANIES ON REVENUE RECOGNITION We have been talking about the new Revenue Recognition standard for several years now. We pointed out that private companies (most of us) got additional time to implement the standard. But, guess what? It is now crunch time!! The November 2018 issue of The Journal of Accountancy provides some valuable insight into the task ahead. “It’s understandable that FASB’s new revenue recognition standard might not be top-of-mind for private company finance personnel despite the impending effective date. The standard takes effect for private companies for annual reporting periods beginning after Dec. 15, 2018, and interim periods within fiscal years beginning after Dec. 15, 2019. So effectively, private companies must adopt by the 2019 year end. That doesn’t give them much time to work on implementation, but it’s still easy for them to overlook the importance of this new standard.” Private company leaders are running out of time to comply with this significant new standard. The most important thing, of course, is to get started. After that, advises the Journal, here’s what private companies can do to make sure they’re able to make an effective transition to the new standard. “Identify your “point person.” Your organization needs somebody in charge of this implementation to make sure it gets done correctly. That’s likely to be someone from the finance department. It’s also important to make sure this person 12
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has the support of people from operations, sales, legal, and other departments to help the implementation go smoothly. Determine the resources you will need. Will your point person be able to handle this implementation alone? Will it be necessary to get other help, perhaps from consultants or temporary accounting services? You need to make sure you have the right people to do this job. Develop a timeline. A well-organized set of milestones, roles, responsibilities, and accountabilities will help you make orderly progress. Scrutinize your contracts. The information in your contracts is the key to complying with the five-step revenue recognition process described in the new standard. In some cases, this close examination of your contracts may show you improvements that can be made in operations. For instance, if you find that certain contracts are losers from a revenue perspective, you may choose to renegotiate them. Evaluate systems. “Do I have those controls in place, and am I able to implement this? And on top of that, you have to look at, ‘Does my accounting system give me the ability to do this?’” If your system can’t do the job, it may be time for an upgrade. Create strong controls over adoption. If your adoption processes are not airtight, you will be susceptible to problems later. Winter 2018 | The Cooperative Accountant
