Mayank Gupta Explains the Revenue Recognition Standard
If you’re well-versed in accounting like Mayank Gupta, you’ve likely already become familiar with the revenue recognition standard that was issued in May 2014.
The new standard was intended to lead to comparability across industries.
“Revenue is one of the single most important measures used by investors, and I believe the new standard — when applied with professional judgment — will consistently report revenue, regardless of the company’s industry or the capital markets accessed,” SEC Chief Accountant James Schnurr said in 2015 at the University of California–Irvine Audit Committee Summit in Newport Beach, Calif.
In order to be compliant with the new standard, many businesses had to undergo a full transformation. But before doing so they had to understand the basics of the revenue recognition standard and its implementation, which Mayank Gupta is here to elaborate on.
Mayank Gupta knows some tips for successful revenue recognition implementation, and he’s here to share them with you in this blog.
Assess Management Information: Under the current revenue recognition standard, there are new processes and controls that businesses and organizations could need to gather information and ensure that it is accurate and complete. The management of an organization should determine whether or not they have the information needed to satisfy the new reporting requirements. Management will also want to take a step back and look at the potential effects the revenue recognition standard could have on internal controls that go beyond financial statements such as information systems, contractual agreements, and tax planning strategies.
Consider Your Resources: Audit committees looking for compliance to the revenue recognition standard are urged to seek out whether or not an organization has dedicated enough resources to analyze the impact of the standard. This puts more pressure on organizations to report their earnings properly and regularly.
Be Prepared for Questions: Management should be able to answer audit committees when they ask why certain changes occurred or why they’re not occurring. Audit committees will also want to know why management went with a specific approach as opposed to others than may be prevalent within the industry.
Challenge Results: If an auditor comes up with a conclusion to their report that does not appear to correctly reflect the implementation efforts of the business or organization, question these results and try to figure out where the discrepancy occurred. However, taking all the aforementioned steps should help prevent this from occurring.
Communicate: When executing its implementation plan, management should maintain good communication with its organization’s key members and explain to them how the standard might impact the organization’s financial statements.
Be sure to visit this blog by Mayank Gupta again soon to receive more accounting and financial advice and information.