After much deliberation, the FASB and IASB are set to release a final global revenue recognition standard in the coming months that will do away with current industry-specific accounting and instead apply a single set of principles to all revenue transactions. Changes to practices, processes and systems could ripple through your business. 10Minutes on revenue recognition provides information about the standard as well as insight into ways in which some companies are preparing for the broader impact.
Your revenue is the most significant financial metric, driving nearly all other results, like net income, EBITDA, and earnings per share. Under the new standard, companies in all industries, under both US GAAP and IFRS, will use a new five-step model to recognize revenue from customer contracts. The intent is greater consistency and comparability throughout the global capital markets and across industries.
While the 2017 effective date may seem far off, proper preparation is essential. Revenue recognition is a critical, and often complex, accounting area. Companies can't afford to get it wrong. Boards and investors want to know what to expect, so get started now.
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