Getting to the Bottom of the Top Line - Preparing to Adopt the New Revenue Recognition Standard – March 2016-04-11

Dixon Hughes Goodman

Description

views Specific areas to consider include: technology. For example, consider whether any key billing system processes may be impacted by the new revenue recognition standard. • Marketing and Sales Operations – While this may not initially be a core accounting change, the new standard may impact processes for sales and/or service contracts to customers. • Geographic Impacts – Consider whether the standard will impact foreign and remote operations. • Key Legal Agreements – Legal agreements between companies might have sales terms embedded. • People – Consider which financial and non-financial employees will need to be involved in managing and implementing the change. How will non-financial employees be impacted? • Debt Covenants – Standard debt covenant calculations that are generated from revenue related data could be impacted. • External Auditors – Communicate with the external auditor, as appropriate, about the expected impact of transitioning to the new standard. • Tax – There are several instances in which the new revenue recognition standard for financial accounting purposes may impact a company’s tax reporting and the financial reporting for taxes. Conclusion The new revenue standard has the potential to significantly impact a company’s reported results, accounting processes and controls, and even general business operations. While the magnitude of the impact will vary across industries, companies should begin the implementation process now to ensure a smoother transition. • Key Financial and Operational Controls – How will changes to revenue processes impact key financial, operational and technology related controls? • Technology – There will likely be changes to information technology and impacts to key controls around How DHG Can Help DHG’s Accounting Readiness team is positioned to help companies think through how the new revenue standard will impact their reported results and accompanying disclosures, accounting processes and controls, and other areas of their business. Understand the guidance For further details about how our Accounting Readiness team can assist your company, please contact us at riskadvisory@dhgllp.com. Assess the impact Get the accounting right • Provide CPE-eligible trainings for a company’s key stakeholders • Help inventory key revenue streams and related processes and controls • Perform accounting analyses on different revenue streams • Provide DHG thoughtware on forthcoming accounting changes • Provide a comprehensive impact assessment (accounting, tax, operations, systems, etc.) • Design and implement new accounting processes and controls • Draft new revenue disclosures and accounting policies 1. The formal effective date for public companies is annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period.

For private companies, the effective date is annual reporting periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019. 2. Refer to ASC 606-10-50-1. Assurance | Tax | Advisory | dhgllp.com 5 .