Despite the dragging discussions on the unification of IFRS (International Reporting Standards) with US GAAP, the revised proposal to join FASB/IASB is moving forward. This effort will unify revenue recognition internationally, and is expected to go into effect in 2015.
While 2015 seems far off, public companies – and companies planning an IPO -- need to start the planning process right away. Why? Public companies are required to maintain three years of historical records on the same accounting basis. If these companies wish to track revenue by both sets of standards for the required three years, they will need to start ASAP!
Private companies also need to start taking action. It would be a wise decision to review the impact of the FASB/IASB project and begin planning for these adjustments. For certain industries – including the technology and software industries, the old revenue standards of SOP 97.2 and EITF 08-01 will be going away, which will move everyone closer to the 08-01 relative value allocation model for any Multi-Element Arrangement.
Everyone should be asking: “Can my current accounting and ERP system handle complex revenue recognition requirements?”
Most ERP systems are built for broad markets and often lack specific vertical industry functionality such as complex revenue, billing, and contract management. This is why large ERP vendors nurture relationships with third party vendors that provide the complementary products that meet these vertical industry challenges. And that’s exactly where
As this changing environment continues to go through revision, it is vital to have the right resources and tools to keep updated and plan ahead.
By Bob Scarborough,