Talk about a disconnect. A new revenue recognition survey from EY reveals that not only are many public companies behind schedule on implementing the new accounting standard by its 2018 effective date, but there’s serious finger-pointing in the C-suite about why that is.
Most (85 percent) CIOs believe their IT team provides the support and skills necessary to meet the new requirements, but only 60 percent of CFOs agree.
And while 80 percent of CIOs think finance and technology staffs are collaborating just fine in delivering systems and process changes, only 68 percent of CFOs agree with that.
Part of the problem is that CFOs and CIOs are focused on different challenges for their respective functions, according to the survey. CFOs think their main challenges lie in educating stakeholders – internal and external – and providing effective training. CIOs believe that providing changes across global or decentralized organizations is a key challenge for moving forward.
“The competing perspectives between CFOs and CIOs reflect their different approaches to the implementation of the new revenue recognition standard,” John McGaw, EY Americas accounting change leader, said in a prepared statement. “The results shine a light on the importance of internal alignment among finance, IT, and other functions, as well as with internal and external audit teams.”
According to the survey, more than 70 percent of companies lack completed revenue recognition programs. More than one-third of companies are facing challenges and risk falling behind schedule – and 14 percent haven’t even begun yet. They cite five reasons for the foot-dragging:
- Fifty-one percent lack enough people to do the job.
- Forty-six percent lack change management capability.
- Forty-four percent face challenges in interpreting the standard’s technical requirements.
- Forty-two percent have trouble collecting the required data.
- Forty-two percent don’t have enough money allocated for the work.
The disconnect, however, may go even deeper. Management believes that the changes associated with the new revenue recognition standard go beyond compliance and could actually transform their businesses. CFOs specifically cited better data quality and insights, strategic cost reduction, and tax efficiencies as the top transformation opportunities.
But while 61 percent of survey respondents buy into that, 43 percent say they’re too focused on getting the new standard’s financial reporting and disclosure requirements completed to get into broader business benefits.
As for IT, more than 50 percent of respondents indicate they are facing a legacy IT burden and complex systems that serve as a barrier to unlocking broader business benefits. CIOs say the data and IT requirements for the new standard are tougher than those for accounting, and manual workarounds are being used to achieve compliance.
About half (45 percent) of companies report that upgrading to a new system poses problems and they worry that they’ll lack a fully functioning system by the deadline.
“To move forward effectively, companies should identify delivery challenges and ensure finance and IT are on the same page,” McGaw said. “They should also plan for and secure appropriate financial and people resources. The opportunity for transformation is still there, but achieving compliance should be the top priority. With the leasing standard change following closely behind, companies should shift gears quickly and apply the lessons learned from revenue recognition implementation.”
EY surveyed 300 finance and IT leaders from US-based public companies across multiple industries, with annual revenues ranging from $1 billion to more than $10 billion, in March.