ASC 606 sounds like a lot of work. How do I go about assessing and implementing 606 at my company?
One of the most frequent questions we receive from finance professionals is how exactly do I implement the new guidance? And while ASC 606 represents a major change that may be viewed as a pain point at times, it also represents significant opportunity if implemented correctly. Your company may have adopted practices that, while not optimal for operational purposes, were completely necessary under existing GAAP to recognize revenue at a period in time that more closely reflects the economic reality of your sales transactions.
Here's the good news: generally, the new revenue standard is far less punitive to technology companies when it comes to recognizing revenue. If implemented correctly, your company can optimize both reporting and operational processes that will allow you to more effectively run your business under ASC 606.
We consider a successful implementation as one that goes beyond reporting.
And we've developed a 7-step framework that ensures our clients' success.
7 Steps to a Successful ASC 606 Implementation
PHASE 1: INITIAL ASSESSMENT
STEP #1: Develop an understanding.
Through discussions with financial reporting and operations, as well as through reviewing a sample of agreements, we quickly and efficiently gain an understanding of the types of issues implementing the new standard will present for your company.
STEP #2: Perform a Gap Analysis and design a proposed revenue recognition model under ASC 606.
We perform a gap analysis to identify where your existing policy will need to be updated and modified under the new revenue standard. We create a go-forward revenue model based on the key issues identified above, and take into consideration new disclosure requirements applicable to your company.
STEP #3: Prepare accounting policy documents to support your company's position.
We draft accounting policy documents to support your company's reporting positions on the new revenue standard. These policy documents will be extremely useful when the auditors show up, or if you ever decide to sell your company.
PHASE 2: IT IMPLEMENTATION
STEP #4: Map out required data needed under new revenue recognition model
Your company will need to extract and analyze data in new ways under the new standard, primarily based on the new variable consideration guidance and the ability to estimate fair value on promised goods or services. We put together a listing of all required data and define how that data will need to be analyzed to allow for reasonable estimations.
STEP #5: Implement IT changes to allow systems to automatically capture required data
We help you implement changes to your key systems which will allow your company to extract and analyze the appropriate data. We have partnered with multiple software providers and will recommend and implement software designed specifically to make your life easy under the new standard.
PHASE 3: PROCESS IMPLEMENTATION
STEP #6: Implement a contract creation and review process
We will create and customize a company-specific revenue checklist, which will allow your internal resources to effectively review and document customer agreements under the new standard. This checklist includes attached templates to help with revenue recognition, calculate the impact of significant financing components, and more.
STEP #7: Train company personnel on the new revenue model
We have internally developed resources that we use to efficiently get your reporting and operations employees up to speed on the new standard.
If you are interested in discussing how we can help your company implement ASC 606, CONTACT US and we'll be in touch.