The Clock Is Ticking on Adopting New Accounting Standards
It might be human nature to procrastinate. It’s definitely not in most accountants’ natures, however. That’s what makes the findings in a recent MorganFranklin poll about the adoption of new revenue recognition and lease accounting standards so surprising. Most companies are simply not making the kind of progress they should be.
Of the 70 leaders in finance and accounting polled by MorganFranklin:
A whopping 63 percent reported they have yet to make substantial progress in adopting the new revenue recognition standards;
19 percent feel they’re well on their way to making the Dec. 15, 2018 deadline;
Nine percent have completed the procedure.
More Time on Lease Accounting
Although the revenue recognition deadline is a mere eight months away, the deadline around the new lease accounting standard isn't quite as urgent: Private companies have until 2020 while publics need to have adopted the new standards by 2019. As such, the lack of overall progress here is less surprising:
68 percent of those polled reported making little or no progress;
Nine percent feel they’re tracking well toward the deadline;
Six percent are already up and running, having completed the adoption of the new standards.
Businesses Are Beginning to Feel the Pressure
If companies have been procrastinating, they’re now feeling the heat to get moving. The issue, at least as it relates to revenue recognition, has risen to the top of the to-do list in most finance departments. Many companies are now moving through the complexities the new standards present; they’re completing audits, meeting with auditors and holding updated board meetings. But, as the poll numbers suggest, most still have a long way to go. And that is creating opportunities for both consulting and accounting firms.
Accounting Firms—and Their Technology—Can Help
The new revenue recognition standards require a certain level of expertise to fully understand the literature and how it applies to a company’s specific situation. Unpacking all the information is not necessarily a task that companies have the in-house skill sets and/or bandwidth to handle. As such, many are raising their hands for help. And while the new lease accounting standard is less complex, there are inherent complications around leases in general (how many a company may have and where they are, for example) that make seeking external consulting both viable and desirable.
As you’d expect, accounting software is playing an important role within the new reporting requirements construct. The leading systems, according to the MorganFranklin survey, ranked QuickBooks at 39 percent usage followed by NetSuite at 30 percent. Software helps on numerous fronts, of course, but in the case of the new standards specifically, it can deliver the kind of granular reporting that boards are increasingly demanding.
The Bottom Line
Simply put, the clock is ticking for companies needing to jump-start preparations and plans for implementing both the new revenue recognition and lease accounting standards. It’s not a task they need to handle on their own, however. From software that can dig deeper than ever into an enterprise to accounting firms that can help not only in the adoption of the new standards but in creating successful financial strategies going forward, there are ample opportunities for businesses to make a thorough and successful transition.
Contact SVA for assistance on complying with the New Accounting Standards
Barbara is Principal-in-Charge of SVA Certified Public Accountants, S.C. Milwaukee office. She is also Director of Business Advisory Services in Milwaukee, where she provides businesses and individuals with accounting, tax and advisory services.