New revenue rules in the accounting world are coming. The new standard’s rules are set to take effect for the period beginning after December 15, 2016, giving companies ample time to prepare. The extra time is needed for companies to organize information and determine the rules’ impact on them.
With the convergence of U.S. generally accepted accounting principles (GAAP) and global international financial reporting standards (IFRS), the new revenue principles represent a combined effort. Both governing bodies will now collaborate to create unified global accounting and reporting standards.
The new rules take a principle-based approach. For example, if a company is able to reasonably estimate revenue, it could record that estimate when the goods or services are delivered, even though there would be some uncertainty as to the final amount to be received via collectability or contingent payment. Under U.S. GAAP, most entities wait to record the revenue until such uncertainties are resolved.
These changes will substantially impact your company’s revenue. Accordingly, you need to begin now to assess the way your company gathers and processes information, in order for your organization to apply these rules.
© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.