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Are you ready to ACT on enhancing your business through revenue recognition and leases?

Beginning January 2018, the new revenue recognition standard took effect for calendar year-end public companies. This can mean adjusting policies, systems, processes and controls for reporting revenue – typically the most important metric in financial statements. And beginning January 2019, public companies will report virtually all leases on the balance sheet, a significant change from the current state. We see these new accounting standards as a chance for you to drive long-term value for your business through:

Automation
Collaboration
Transformation

Let’s propel finance into the Transformative Age.

EY - Automation, Collaboration, Transformation

Is your business ready for new thinking on Accounting Change?

ACT on leases

The new leases standard puts your business in new territory, where accounting is driving unprecedented cross-organizational change. Beginning on January 1, 2019, US public companies will need to report virtually all leases on the balance sheet. The new leases standard will require more disclosure, with the goal of increasing transparency and comparability.

Companies are in the thick of their lease accounting journey—from diagnostic to data abstraction to designing and implementing long-term lease administration and accounting systems and related processes and controls. We support compliance as well as operational improvement through a cross-competency integrated approach that allows you to focus on developing a long-term, sustainable process.

With that approach, you will be better poised to take advantage of the dividends that compliance can bring: improvements in business processes, IT systems and controls that can pay off operationally throughout your organization.

EY - Key risks associated with lease administration and lease accounting
 

ACT on revenue recognition

Companies have been preparing for the new revenue recognition standard for some time, and now the effective date has passed. As they turn their attention from implementation to reporting, public companies are ensuring systems and processes are adequately equipped to issue financial statements under the new standard as well as establishing internal controls to support ongoing reporting.

A great deal is on the line, since the new standard could affect investor perceptions of company performance. But companies also have the opportunity to derive value from required change by translating compliance into operational improvements.

EY - Step model for recognizing revenue

Whether you have automated your revenue accounting or implemented manual workarounds to complete reporting with plans to implement a more sustainable system later, now is the time to start thinking of your post-effective date needs and opportunities. EY can support your efforts not only to report effectively under the new standard but also enhance your business for the future – whether that is through refining and automating financial reporting processes, enhancing efficiency of internal controls and cross-organizational collaboration, or initiating key transformation efforts. Are you ready to ACT on enhancing your business through revenue recognition?

1. Finalize accounting decisions

Most of the organizational impacts resulting from the new revenue recognition standard follow on from the accounting impacts. Finalizing accounting decisions is key to unlocking your path to adoption. What is your transition method? Which revenue streams are impacted? Answering these questions can guide you along the rest of the path.

2. Quantify the impact

Issuing financial statements under the new revenue recognition standard represents the culmination of the implementation journey. How are you going to calculate the financial line items in those financial statements? Where are you going to get the data for those calculations? You will need this information to reflect the new standard on your financial statements.

3. Disclose

Another key component to financial reporting under the new revenue recognition standard is disclosure, and there are many new disclosure requirements. Do you have the information necessary to meet these requirements? Many companies are still trying to answer this question, but a plan for identifying, gathering and reporting this data is key.

4. Update processes, controls and systems

To operationalize your new accounting conclusions, calculate your financial statement impact and provide your new disclosures, we recommend that you identify necessary updates to your processes, controls and systems. Have you assessed the internal controls over financial reporting for your implementation process and ongoing reporting? Are there any systems or process changes you can make to improve reporting even after the effective date? Even after successfully implementing the new revenue recognition standard, you can continue to improve your processes, controls and systems to make reporting more efficient and effective.

5. Tax and statutory reporting

Many companies have not focused on the variety of tax and statutory reporting impacts under the new revenue recognition standard. How many different elements of tax accounting, reporting and compliance have you evaluated? Have you identified all the jurisdictions in which you report? Tax and statutory reporting can require increased attention to detail.