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Case Study

Implementing New Revenue Recognition Guidance, ASC 606

Industry
Team Size
1 Managing Director, 1 Director, 1 Vice President
Project Duration
3 months

The Challenge

A leading global private equity firm acquired a healthcare revenue enhancement Company. Faced with an approaching deadline for the new FASB revenue standard, ASC 606, the Company’s management team lacked the internal resources to improve revenue recognition practices. They wanted to adopt 606 early, but significant help was needed – this is where we came in.

Services

Regulatory Compliance

Transparent Reporting

Revenue Visibility

The Execution

To implement the new recognition standard ahead of time, our team completed the following:

  • Selected a representative sample for each of the Company’s 15 revenue streams
  • Performed detailed contract reviews to validate/refine anticipated gap findings, including the identification of all separate performance obligations
  • Developed a Combined Issues Log for accounting, disclosure, and reporting gaps
  • Drafted new revenue recognition accounting policies
  • Prepared an assessment of the quantitative impact of the new accounting rules
  • Prepared analysis of applicable accounting and disclosure differences
  • Performed a stand-alone selling price analysis for performance obligations identified
  • Developed template transition adjustments and calculation methodology
  • Calculated opening balance sheets adjustments to contract costs, deferred revenue, capitalized costs, asset amortization, and retained earnings

The Results

In the end, we successfully implemented the new recognition standard ahead of time – significantly improving the Company’s revenue reporting, while obtaining a clean audit opinion, issued by the Big Four external auditor in connection with annual financial statements prepared in full compliance with ASC 606.

The key results were: the removal of inconsistencies and weaknesses in old revenue recognition process across the subsidiaries; development of new corporate revenue accounting policies serving as a more robust framework for addressing ongoing and new revenue issues; improvement of revenue recognition practices and procedures; provision of more useful information to the Company’s investors and management; and simplification of the preparation of financial statements by reducing and structuring the accounting requirements and developing monthly close checklists.