New regulations will affect revenue recognition

Tackling ASC606 & IFRS 15 with CPM

New regulations will affect revenue recognition

In Robert Kugel’s recent viewpoint paper, titled Planning and Budgeting under ASC606 and IFRS 15, the industry analyst & research director for Ventana Research says he expects ASC606 and IFRS 15 to have a significant impact on the way many companies go about their accounting. These new regulations will affect revenue recognition for contracts. In his viewpoint, Kugel also suggests that this change will increase the need for organizations to revisit their planning and budgeting processes.

Right now, companies recognize revenue when particular goods are delivered or when a service milestone is reached. More specifically, entities recognize revenue as a way to depict the transfer of promised goods or services to customers. This revenue is reflective of the monetary value that the entity attributes to the goods above or services.

Before the new regulations are introduced, basic desktop spreadsheet applications, such as Excel, were sufficient for basic planning and budgeting. However, with the introduction of ASC606 and IFRS 15, FP&A groups will need to become even more adept at tracking and providing guidance on cash flow and reported earnings directly related to contract revenue. This presents a challenging before-and-after scenario for many organizations, especially for those that do not currently have a dedicated planning application, such as Corporate Performance Management (CPM) software.

Felix Mann, senior business solutions manager at Prophix, suggests that CPM software is well suited to addressing the challenges of these new regulations. “All US companies will likely have to consider changes to their information technology systems, processes, and internal controls as a direct result of the increased disclosure requirements resulting from ASC606 and IFRS 15. CPM solutions, particularly those that include Detailed Planning Manager functionality, can help FP&A groups to manage this new accounting requirement.” Consequently, Kugel’s primary recommendation is that companies review the robustness of their financial planning and budgeting software tools in anticipation of ASC606 and IFRS 15.

To access the full report from Ventana Research, please click here

Mike Tindal

As the SVP of Corporate & Market Development at Prophix, Michael Tindal is responsible for the overall marketing function within the company. Michael drives long-term strategy by gathering market intelligence and by seeking out and developing relationships with other relevant technology providers. Based on 35+ years in the technology industry, he brings extensive management, marketing, sales, and business development experience to his role at Prophix. His past positions have included global management roles with worldwide leaders in the software industry, such as OpenText and SAS, along with sales management positions at SUN Microsystems and Digital Equipment. Michael’s background has involved a variety of national and international responsibilities across all aspects of the marketing continuum, from product marketing to corporate communications, field marketing, and enablement. In each of these roles, he has focused on introducing, measuring, and successfully achieving quantifiable metrics that have a direct impact on the success of the company.