Finance & Accounting Professionals: You thought you were busy now?
The Revenue Recognition Tsunami is Coming (aka IFSR 15). Are you prepared?
You already know that financial accountants, financial controllers and CFO’s work harder and have more to do than anyone else appreciates.Things are about to become busier, sooner than you think.. As of 1 January 2018, you will be required to have implemented the new Revenue Recognition standard IFRS 15. To make matters worse, this standard has a retrospective application.
You may think this won’t affect you however, don’t be fooled because with IFRS 15, Revenue Recognition will never be the same and every entity that generates revenue will be affected. Revenue will now be recognised when control of the promised goods or services are transferred to the customer, not when risks and rewards pass.
Traditionally, Revenue Recognition has been very loose in its interpretation. From 2018, your accounting software will have to be capable of adhering to the new standards. Just remember these standards are retrospective so any active contract at 1 January 2018 needs to adhere to IFRS 15.
It will have to be able to:
- Account for product or service based revenues across multiple revenue recognition methods
- Identify the contracts with customers
- Identify the separate performance obligations
- Determine the transaction price
- Allocate the transaction price to the performance obligations
- Calculate and allocate fair value pricing
- Recognise the allocated revenue when the performance obligation is satisfied
- Be audit proof to the extent that penalties for non compliance can be significant
The worst thing you can do is put your head in the sand and ignore it.
Start planning, start planning early, start now. Talk to Fronde. We are Revenue Recognition software experts and can help.