Copyright © 2016 Blue Hill Research
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ANALYST INSIGHT
IntacctLeadstheWayinASC606andIFRS15RevenueRecognition
Published: May 2016 Report Number: A0241
Analyst: Hyoun Park, Chief Research Officer Share This Report
What You Need To Know
Every subscription-based business and services firm should be aware of
ASC 606 (FASB ASU 2014-09) and IFRS 15, which substantially affect
how revenue is recognized. As this new standard is established, these
companies will have to recognize revenue correctly or risk audits and
the need to re-file earnings. Blue Hill believes that Intacct has taken an
important leadership stance in providing a first-to-market revenue
recognition solution for organizations seeking to understand how best
to manage "performance obligations" and event-based revenue.
ASC 606 and IFRS 15 Revenue Recognition
Standards
ASC 606 and IFRS 15 represent a shared agreement between FASB
(Financial Accounting Standards Board) and IASB (International
Accounting Standards Board) regarding best practices for recognizing
professional services contract revenue. Under this new standard, Blue
Hill notes a variety of interesting new definitions and requirements for
revenue recognition, including:
• Revenue is recognized based on defined "performance
obligations," which can be thought of as being similar to
deliverables in multi-element revenue recognition.
• Each performance obligation must be accounted for distinctly
as a standalone good or service and as defined within a
contract.
• The full transaction price can reflect variable amounts that are
"probable" of not having significant reversals based on prior
experience with similar delivery arrangements. The transaction
price should also reflect the time-value of money if financing is
a significant project component.
AT A GLANCE
Solutions
On May 20
th
, 2016, Intacct
launched a first-to-market solution
that displays ASC 606 and IFRS 15
revenue recognition standards in
its Contract and Revenue
Management solution, taking
advantage of Intacct's
dimensionality and providing a
head start for companies that need
to transition to the new guidelines.
Relevant Industries
Industries affected include, but are
not limited to: Aerospace,
Communications, Defense,
Engineering, Law, Media,
Information Technology,
Management Consulting, Marketing
Services, and Pharmaceuticals.
Benefits
By using Intacct's Contract and
Revenue Management solution,
companies can simultaneously see
their revenue both based on
existing and upcoming rules, which
aids with forecasting, guidance,
and invoicing. Firms currently
signing multi-year deals have
greater visibility to the true impact
those deals may have on future
earnings.
