5 Ways Credit Teams Can Improve Compliance with ASC 606 and IFRS 15.
This deck covers the goals of the Account Standard Change and provides insights into how to best implement the ASC 606 and IFRS 15. The goals of the ASC include transparency, accountability, and efficiency. The ASC will achieve transparency by improving the ability to easily compare financials around the globe. Accountability will become more prevalent by making financial information more freely available and accessible. Accounting standards will be more efficient by helping investors identify risk and opportunity across the world.
The drivers of the Accounting Standards Change are global consistency, updates to United States standards, broad impacts to global finance, and evolving business models. These accounting standards will be the first sweeping change to US reporting in 40+ years. Account standards need to keep up with business as over 33% of business is now done across boarders, and modern business models are requiring different reporting styles.
The ASC 606 & IFRS 15 Five Steps to New Recognition are: identify, map, determine, allocate and claim. The first step requires businesses to identify the contract with a customer. Next, companies must map the performance obligations to the contract. Companies must also determine the transaction price to each deliverable. Then they need to allocate the price to the contracts performance obligations. Finally business must claim revenue when performance obligations are satisfied.
Here are the most frequently asked questions for the ASC 606 and IFRS 15:
Q) Are there Non-Compliance Penalties?
A) Non-compliance could result in major impacts to investor confidence, share price and eventual stock delisting.
Q) Who is impacted and when?
A) All public companies were to certify compliance with their external auditor with the new GAAP standard within 2018 however some companies petitioned for an extension to 2019. All private companies to be compliant by the end of 2019.
Q) Why would a private company comply?
A) ASC 606 and IFRS 15 are standards which many larger private companies follow to ensure they have access to financial resources that require financials such as bank loans, floating new debt or filing taking company public (IPO).
Did you also know that many large organizations will not extend credit terms to non-compliant suppliers?
Dun & Bradstreet's five ways to simplify revenue recognition are:
1) Identify your contracts
2) Link your customers
3) Evaluate your customers' creditworthiness
4) Align your collections efficacy
5) Monitor changes in your customer portfolio
For more information about how Dun & Bradstreet can help improve your implementation of ASC 606 and IFRS 15 visit our website here: