Question

New Revenue Recognition Standard

Please discuss some of the key changes included in the new standard. The new standard was implemented this year for publicly traded companies and next year for privately-held companies. Have publicly traded companies encountered challenges with implementation?

Answer 1

Answer (a) As per principal of new slandered on revenue reorganization, recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A company should following five steps to achieve the core principle-

1. Identify the contract with a costumer
2. Identify the performance obligation (promise) in contract.
3. Determine the transaction price.
4. Allocate the transaction price to performance obligation in the contract.
5. Recognize revenue when reporting organization satisfies a performance obligation.

Following are the major/key changes in new standard of revenue reorganization than old slandered.

In old standard	In new standard
Numerous requirements for recognizing revenue.	Consistent principles for recognizing revenue, regardless of industry and/ or geography.
Provide limited information about revenue contracts.	Provide all require information to user about organization’s contract with customers.
No separate revenue recognizes for goods or services promised of distinct in a contract.	Identify each goods or services with their performance obligation. And recognize revenue when each performance obligation is satisfied.
Accounting for variable consideration differs greatly across industries.	A single model to consider for variable consideration, which includes rebates, discount, bonuses, or a right of return. Variable consideration will be included in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

This new slandered affect both private and public companies. For public company, this standard elimination of the wide variety of industry specific prescriptive criteria will not only impact the financial reporting processes related to revenue recognize, but is also expected to impact other key areas of a company’s operating environment of a public company.

Because the adoption of the new standard would be pervade an organization. A public company’s implementation effort should consider the finance and accounting function, also sales and marketing; program management, legal, information technology; and investor relations should be considered..