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New Revenue Recognition Standard

We are a trucking company. It has been our practice to recognized freight transportation revenue when we deliver the load (605-20-25-13). We are being told that under the new standard we must use a proportionate performance method - in other words, try to estimate the distance travelled vs. the contracted distance and prorate. Impractical from our perspective. Longest trip might be three days. Has anyone else been subject to this new standard? Is the interpretation from my audit firm correct?

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Not gonna comment on the answer but I will give you "counter/s" you can ask your auditors...

First and most important - In accordance with the MATCHING PRINCIPLE, would the corresponding COSTS also be recognized? How do they propose to do that? In this case, you can't implement a standard (revenue) and not implement the other side (costs) of it.

Then there is the question of MATERIALITY. Is it material enough to affect your financials?

Then as you pointed out, there is the question of PRACTICALITY. Some pronouncements/standards makes sense in theory but horrendous or impractical in the real world. Or maybe companies are NOT (yet) structured or prepared to present that kind of detail.

I would recommend talking with the PARTNER IN CHARGE and argue your case. Maybe compromise according to what the company can conceivably and practically implement.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Have you discussed this with the Audit Partner?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Maybe look at your actual delivery schedule and see how your end of month deliveries in transit vary from month to month. What I mean is that if your contract says you must deliver to get paid, and the variance in the number of deliveries "in transit" on the last day of each month is not material, why bother?
I'd build up a case based on empirical evidence before allowing my auditors to get all hypothetical on me (for a fee of course:) ).

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