The Final Countdown: ASC 606 and Revenue Recognition
The editors of Accounting Today, a leading accounting industry publication, sat down with FloQast co-founder and CEO Mike Whitmire recently to discuss ASC 606, the biggest accounting compliance change in recent history, otherwise known as the new revenue recognition standard.
The new rule will go into effect January 1, 2019 for private companies and already applies to public companies. With businesses preparing for a new era in compliance, Mike took a look at some of the challenges they will face moving forward:
“We just got done restating our revenue recognition within the last three weeks,” said FloQast CEO Mike Whitmire. “We got through our first audit as a company. It killed our revenue last year because we signed contracts and our contracts have two deliverables. We have an implementation fee and then a software fee. We’re not dealing with 50 deliverables on an order form. It’s pretty straightforward. The way our process works is we’ll sign a new customer and we’ll send them over to the setup team. The setup team works with them for one to two or three weeks, gets them set up, and then they’re off and running on the software. They’re supported by our account management team and then our support team as well. These are distinct teams that go behind this. But the revenue recognition [standard] says we need to recognize a setup fee over the course of the estimated contract life, which is pretty killer.”
So at this point, you’re either thinking “I got a handle on this,” or “help!”
If the latter, we have you covered. To help mitigate these dual reporting challenges ASC 606 requires companies to comply with, we added multi-book accounting capabilities to our month-end financial close solution. No need to panic. The multi-book accounting feature is meant to help organizations easily and efficiently maintain dual reporting on revenue and expenses allocated according to two sets of rules, which is required by ASC 606.
Capabilities supported by the new feature include:
- Automation of manual processes: Accountants and finance professionals can reallocate revenue and expenses to see and understand the impact of the new rules without extra work.
- Improvement of business insight: Users get a clear picture of how subscription revenue and expense allocations will impact the business.
- Audit readiness: Auditors can see a clear trail of revenue, and don’t have to go to the controller to determine how lump sums of revenue are broken out.
As accounting teams everywhere prepare for the big shift, the FloQast team is working diligently to ensure all businesses have access to the features they will need.
“ASC 606 is a major change to how companies recognize revenue and expenses, placing a new burden on accounting teams,” continued Mike. “At FloQast we’re constantly enhancing our solution to address new regulations and requirements and to simplify and ease the growing demands required of accountants.”
Think you’ll need help with ASC 606 compliance? Multi-book accounting is available today for Oracle NetSuite and Sage Intacct ERPs and is included at no extra charge in FloQast Business, Corporate and Enterprise subscription plans. To learn more, visit floqast.com/product.