The new revenue recognition standard will be here before we know it and you should be treating it as top priority in your organization. The standard will officially be enforced upon public companies after December 15th, 2017. If your company ends its fiscal year on December 31st, the new standard will apply with quarterly reports starting in January. According to the Journal of Accountancy the standard is a five step process;
- Determine whether you have a contract
- Identify the performance obligations
- Determine the transaction price
- Allocate the transaction price
- Recognize when (or as) performance obligations are satisfied
Since it was announced that the standard is coming to fruition, there have been “many implications,” “changing business model,” or “full transformation” that will be required in order to be compliant in time. However, managing the new Revenue Recognition Standard is easily achievable by utilizing the most innovative tools and automated accounting solutions.
According to Accounting Today, this standard will have the largest effect on the software and tech industries because many of the companies within this industry have signed long-term contracts with their clients. Under the new revenue recognition standard, money gained incrementally over the lifetime of this contract could be recognized immediately. That could have huge effects on how these two industries handle their daily business.
Changing your entire business model, especially if you are a small company, can be dangerous to your organization. The automated accounting solutions that have the ability to store and manage your client contracts will save you time, money, and the opportunity cost lost when manually managing the new revenue recognition standard. To learn more about automated accounting solutions, click the button below.