ASC 606, Revenue from Contracts with Customers, may be the biggest change the accounting world has seen in over a decade. To help businesses and their technology partners adapt to comply with these new standards, NetSuite has compiled seven helpful steps. Read a summary of the whitepaper below, and download the whitepaper for more information.

1. Meet the New Standard – FASB’s ASC 606/IASB’s IFRS 15

Or in Plain English: Revenue from Contracts with Customers

If you aren’t already familiar with these changes, The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB)—the two main accounting standards organizations—jointly announced a new, converged set of revenue recognition guidelines in May of 2014.

Their goal is to replace a slew of industry-specific standards in the U.S. and Europe with a single, principal-based approach. There are some differences between the IASB and FASB standards – they are summed up well in this article from INDEED.

2. The New Five Step Model for Recognizing Revenue

The Devil is in the Details

The new standards for revenue recognition can be summarized as: Recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The five step model for recognizing revenue includes:

1. Identify the contract with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price
5. Recognize revenue when or as you satisfy a performance obligation

Download the whitepaper for further explanation into some of the complexities companies can expect when implementing this process.

3. A Change that Impacts All Industries

Software & High Tech, Retail & Distribution, Manufacturing, VARs & Solution Providers, Media/Publishing, Advertising, and Nonprofits are only some of the industries that are impacted by the changes in revenue recognition standards. The change will impact businesses across all industries.

4. Effective Dates are on the Horizon

The new deadline for ASC 606 adoption by public companies is December 15, 2017. Private companies have the option to wait until December 15, 2018.

These deadlines will come faster than you expect. You can start now by assessing how the changes will impact different areas of your organization.

5. The Burden on Finance and IT

Although ASC 606 will have varying degrees of impact across industries, one thing is certain—finance and IT departments will take the brunt of the impact. Existing financial systems will need to be evaluated for their ability to accurately cover all the permutations of an organization’s various revenue arrangements.

6. Three Critical Systems Capabilities

Organizations will benefit from a modern approach to the challenge of complying with evolving regulatory standards, including:

1. Flexible revenue management engine
2. Granular reporting capabilities
3. The ability to recognize revenue simultaneously

For businesses running outdated ERP systems or Quickbooks, now might be the right time to modernize.

7. A Timeline for Getting Started

The recommended timeline has organizations in the user acceptance testing phase by July 2017. If you are only starting to dive in to this process, contact us – we can help.

Download the whitepaper to learn more.