Are You Ready For New FASB and IASB Finance Rules?

[tasmih1234]

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have issued their long-awaited converged standard on revenue recognition. The rule governs how and when revenues can be recognized in different industries. In essence, the new rule will do away with current industry-specific accounting practices and instead apply a single set of principles to all revenue transactions.

The following is a summary of my recent interview with Gabe Zubizarreta, CEO and founding principal of Silicon Valley Accountants, about the impact of the changes to revenue recognition within finance and beyond its walls.

At first glance, the new rule seems to apply to companies dominican republic mobile numbers list that sell software. But you maintain the new rule applies to all business sectors. What are some examples of how the rule will impact sectors beyond business software vendors?

Every company will have new more detailed disclosure requirements—all companies that sell multiple elements in a single contract will be affected. The method of estimating bad debts will be altered. Contingent revenue will change from “until assured” to “estimate at inception.” The guidance in all areas is going to become more subjective. Certain sales and fulfillment costs may need to be capitalized. There are also tax implications for most accrual-based corporations.

Can you give a few examples of how this change in an accounting rule winds up impacting people in functional areas outside of finance?

New sales contracts; new definitions of products, services, and SKUs; new evidence of delivery or acceptance; new estimation methods; new tracking and allocations of certain selling and fulfillment costs; potential amended tax filings.

Why the strong sense of urgency in your thought leadership message?

If you wait until there is certainty, it will be too late, very expensive, and may result in reporting risk. There are many potential unintended consequences and secondary effects. And because there are so many resource demands, late changes will be expensive. Also, there will be COSO, SOX and audit implications.