Revenue recognition is crucial in financial reporting to determine a company’s financial performance and position, but it can also be highly complex and differs widely across industries. It is critical that companies get it right.
The standards of the FASB (Financial Accounting Standards Board) and the IASB (International Accounting Standards Board) also differ – so as a result they got together to implement the following improvements:
1. Remove inconsistencies and weaknesses in existing revenue requirements.
2. Provide a more robust framework for addressing revenue issues.
3. Improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.
4. Provide more useful information to users of financial statements through improved disclosure requirements.
5. Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. (Source: http://www.fasb.org/project/revenue_recognition.shtml )
According to a KPMG 2017 survey, despite this consolidation of the guidelines 62% of companies surveyed were still assessing the implications and actions required of the new legislation, whilst worryingly 19% had not begun any action. If you are still managing your revenue recognition on spreadsheets and struggling to cope, now is the time to consider doing it properly.
Elevate2 can help ensure that you are well prepared to start recognising revenue correctly, and that you are using a robust accounting system like NetSuite, which can automate it for you. Contact us now for a free initial consultation.
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