CFOs’ Confidence Mixed on Revenue Standard Effortsby
A growing number of reports indicate a slow start to revenue recognition implementation efforts, and a new survey by Robert Half Management Resources further drives home the point.
While 64 percent of the more than 2,200 CFOs surveyed said their companies will meet the deadline to adopt the new standard, 59 percent said they have not started the diagnostic work to determine how much effort will be required for their companies to make the transition.
Those percentages remain fairly constant when broken down by company size â ranging from 20 to 49 employees to at least 1,000. Three exceptions: Fewer (55 percent) of the CFOs at the largest companies said they'd be ready in time. More CFOs (40 percent) at companies with 500 to 999 employees had already begun preparations to make changes to systems and processes, while 45 percent said they hadn't begun.
By industry, CFOs in manufacturing (69 percent) and âotherâ (72 percent) industry categories had higher expectations to be done on time. Across all industries, about a quarter to a third indicated they'd be done early.
As to preparations by industry, results were similar in most industry categories. But greater numbers of CFOs in transportation (67 percent) and âotherâ (65 percent) said they hadn't begun.
The converged standard on the recognition of revenue from contracts with customers was introduced by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in May 2014.
The guidance â which standardizes how companies should recognize revenue in financial statements under both US GAAP and International Financial Reporting Standards (IFRS) â was supposed to take effect starting in 2017. However, after several companies expressed concern that they would not have enough time to update their systems and processes before 2017, the FASB agreed to push back the effective date to Jan. 1, 2018, for public companies and to Jan. 1, 2019, for nonpublic companies. The IASB also delayed the effective date by one year for companies that use IFRS.
âWhile the first adoption date for the new revenue recognition standard is more than a year out, firms should be determining the work that will be involved with the transition and avoid delaying their efforts,â Paul McDonald, Robert Half senior executive director, said in a prepared statement. âComplying with the new rules is a massive change-, project-, and staff-management effort affecting nearly all parts of the business â from accounting and finance to sales, human resources, IT, legal, training, and communications.â
What to do? Robert Half offers seven suggestions:
- Assess what has to be done to be ready.
- Ensure senior management knows the upcoming changes and the resources needed to meet the guidelines.
- Identify everyone who will be involved in the transition.
- Determine staffers' skill sets and expertise, as well as possible gaps that will need to be addressed.
- Assess where more full-time employees will be needed and areas requiring outside consultants.
- Put a training program into place.
- Let everyone know â from the C-suite to staffers working on the project â when certain progress points and deadlines are met.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.