Revenue Recognition: Challenges in Implementing the New Standard

Energy & Resources

By Theodore Pettko

I’m sure by now you have heard there is going to be a little change in how practically all companies, including E & P companies, recognize revenue.  I thought I would share some of the challenges in implementing this new standard.

  • Judgement – the new standard requires a lot of interpretation of what is a performance obligation, when it is satisfied, the price and the allocation of the price to the corresponding obligation.  Figuring out how this standard applies is the first step in recognizing revenue.

  • Reporting – the new standard allows retrospective application, which is like dual tracking of revenue.  How are you going to be able to record this?  There are new disclosures with this standard, and you will need to change your processes to ensure you are capturing this data.

  • Systems – you could possibly have costs of revenues that will be capitalized, which will be amortized.  How are the contract duration, costs and amortization, not to mention impairment assessment, occurring? 

  • Controls – with the adaptation of these items, what existing financial and reporting controls need modified or implemented?

Just a couple things to think about as you prepare to implement this standard. As always, we invite you to contact your Schneider Downs representative if you’d like advice or guidance navigating the new standard. We’re happy to help. For additional information, visit the Our Thoughts On... blog.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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