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Rev Rec is coming - are you really seeing a difference?

According to Compliance Week:

"Only 1 percent of the Fortune 500 say their adoption of new revenue recognition accounting rules will have a material effect on the company’s financial statements, according to a PwC analysis, while 54 percent say definitively that the effect will be immaterial. Another 17 percent have provided some qualitative disclosures about the expected effect of adoption, but no materiality call and no hard data."

https://www.complianceweek.com/blogs/accounting-auditing-update/half-of-fortune-500-still-noncommittal-on-new-revenue-rules

So, if the above figures are correct, this may be another fee generation for the public accounting firms, a drain on the resources of the company and net gain pretty insubstantial to the proposed groups who "need to see transparency", namely investors and creditors.

What's your opinion?

Answers

Richard Archer
Title: Principal
Company: CG Management Solutions
(Principal, CG Management Solutions) |

Wayne - I'm surprised by the Compliance Week estimate, because it differs significantly from reports I'm seeing from a couple of consultants specializing in implementing the new Rev Rec standards. I sat in on a webinar by one of the consultants just two weeks ago. At that time, his tracking on Rev Rec compliance showed that most public companies, even among bigger companies in the Fortune 500, had not completed the required assessments of their revenue streams in order to accurately determine the impact of the new standard. He did mention that he is seeing companies claiming that there won't be any impact, but he thinks the companies are in for a big surprise when they complete the full assessments that are required to implement the new standards.

I think you are right, though. If it turns out that most companies won't have to change their revenue recognition approach, then this will turn out to be just another academic exercise by the FASB that will do little more than generate another revenue stream for external auditing firms. Especially in the first year implementation, when the external auditors are required to assess the analysis done by their clients in determining whether or not the new Rev Rec standard applies. That is extra time that has to be added to every audit and most of that will be time charged by very high billing rate Audit Supervisors, Managers, and Partners, along with SEC specialists.

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

Richard,

I agree with your second paragraph. More and more GAAP rules are geared not toward the investor/creditor or even regulators; they are gear toward revenue generation by those (big 4) who are busy making these new rules.

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