Could adding an extra trillion dollars to US balance sheets actually benefit business?
Find out how EY is helping companies rethink requirements for revenue recognition and leases.
Today’s Accounting Change warrants a capital A and a capital C. It's a time that gives us not one, but two wholesale overhauls of major swaths of the accounting tapestry — revenue recognition and leases — and schedules them to take effect within a year of each other.
That’s on top of other ongoing and future accounting changes, like financial instruments, simplification and disclosure effectiveness.
Sweeping changes like these don’t come along very often. They require your attention and action. However, if your response is handled strategically, this is also a time of opportunity.
Companies that handle these transitions smartly may find themselves equipped with an array of improvements — state-of-the-art IT, upgraded systems, processes and controls, and perhaps even a transformed operating model.
We can help you rethink revenue recognition and lease requirements and help you uncover those related opportunities. Contact us today to learn more.
Three Accounting Change readiness factors to consider now:
- Converging deadlines
For now, the calendar, if nothing else, has become a call to action. The new revenue recognition guidance takes effect at the start of 2018 for calendar-year public business entities. The leases guidance needs to be implemented at the start of 2019.
Making things more complicated, forms of early adoption are permitted under both standards. If a company elects to adopt leases at an earlier point, the implementation of both standards could fully converge or even switch in order, with leasing coming first.
- New judgments and disclosures
Both sets of changes require new levels of judgment and disclosure, making the process more complicated and cumbersome than before. To fuel the changes, great amounts of new data must be collected, analyzed and processed, demanding greater levels of transparency.
- Preparing and budgeting for change
Another key issue is the expense of implementation. The urgency and scope of the projects need to be made clear as soon as possible, if they haven’t been already. Short- and long-term budgets need to be prepared, not just for the finance function, but for IT, treasury, lease administration, legal and other departments. Part of those budgets may be earmarked for new staff and systems in finance, IT and perhaps other areas in the organization.
Accounting Change radiates beyond finance.
Revenue recognition, leases and other changes impact functions and geographies across organizations, necessitating a cross-organizational approach to achieve compliance and capture added value from mandated change.