All companies track and report on the revenue earned over a certain period of time. They always have, and always will. But, things are changing. Over the next few months organisations will focussed on getting themselves up to speed in preparation for 1 January 2018 when a completely new set of accounting standards revolving around the way you recognise revenue from contract with customers, will be introduced.
So, as the clock ticks, the question begs: How ready are you for this?
Deloitte explains the accounting standards changes as follows: “IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers) are completely new accounting standards superseding IAS 39 and IAS 11/18 and related interpretations with an effective date of January 1, 2018. IFRS 16 (Leases) is also an important and completely new standard, which is on the horizon and will supersede IAS 17, with an effective date of January 1, 2019.”
And if you’re not quite sure how to answer our question, we’d like to remind you that you have just over 2 months to get yourself up to speed.
So, why the change?
For the most part, the primary reason why these changes are being implemented, and are necessary, is because the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) are complicated and inconsistent – and one key example of that is that different industries have different recognised standards. Where currently, the standards focus on the type of industry, the new standards will be focused on the timing of a transaction, the nature of the transaction and the level of uncertainty for contracts. The FASB also suggests that by introducing new standards, it will provide a more robust framework for addressing revenue issues.
What this means for you:
If you haven’t already familiarized yourself with the FASB’s new expectation, then you have 2 months to get yourself up to speed, and quickly. But simply reading the new guidelines and attacking with a Big Bang approach is not enough to get your reporting and recognition fool-proof. There’s a lot more you can do to ensure your organisation remains compliant and ready for the new standards – usually, this involves testing and use-case examples to iron out any misunderstanding or misinterpretation.
What you can do today to get yourself ready:
Create a task-team to focus purely on getting your business up to speed: This means that they will not only familiarise themselves with the new set of standards, but will need to pick through your business process to identify any potential trouble-some areas that may pose a risk to compliance in the new year.
Determine what, if any, new disclosures you will need to make as a business – and what the knock-on effect of that is, towards your suppliers, your stakeholders and your clients. This also includes any key disclosures that you’d need to make in the interim, in preparation for rolling out a new operational and accounting standard in the new year.
While all of this will hopefully make things easier and clearer in the long-run, there will undoubtedly be a period of uncertainty and confusion. This is why you need us. We are at the precipice of the current, and the new – which means that we have the knowledge and insight to ensure that your business is compliant, and prepared for any future changes that lie ahead. If you need help getting your business ready for 1 January 2018, then get in touch with us today.