ASC 606 Implementation
Let's talk revenue recognition.
Everything is about to change – everything about revenue recognition, that is. Referred to as “the most impactful accounting change in decades,” ASC 606 affects every public and private company, regardless of size or industry. And now that the January 1st deadline has come and gone, the standard is officially in effect for all private entities.
WHAT THIS MEANS: PE-backed CFOs are bound to face added pressure – after all, accurate revenue reporting is not only critical to company success; it also informs the strategic roadmap for its investment and indicates the most appropriate value creation initiatives to execute. The smallest mistake regarding revenue reporting can have major ramifications, but the good news is: we can help.
Our team has successfully implemented the new standard for several PE-backed companies, resulting in: improvement of revenue recognition practices and procedures; provision of more valuable information to investors; and simplification of the preparation of financial statements (to name a few). And guess what? We can do the same for your company.
Compared to public entities, private companies are having a harder time implementing 606 due to fewer internal resources and system constraints. Our team specializes in this type of situation – we've developed a 5-step implementation process that has minimized stress & risk for many companies.
5 Steps to ASC 606 Implementation
Steps 1 & 2: Build & Assess
To start, we’ll build a project team that includes the right stakeholders across functions and business segments. Then, during the assessment phase, we'll evaluate current accounting policies, review contracts, scope revenue streams/locations, align enterprises, and identify accounting disclosure & data gaps.
Step 3: Transition
Following steps 1 & 2, we'll have a clearer picture of where the business is today and where it should be tomorrow...and the next step is choosing the best transition method for getting there. This choice is based entirely on data availability, comparability, and costs.
Step 4: Design
This step is about designing the future state and the timeline to reach it. We'll draft new accounting policies & procedures; define systems, processes, controls, and training requirements; develop templates, use cases, and opening balance sheet; and create an implementation plan.
Step 5: Implement
Now it’s time to execute the plan. This entails configuring and testing new systems & processes; rolling out reporting packages & guidelines; drafting comparative financial statements; implementing permanent plan procedures; and then deploying & providing support.