7 Actions Manufacturers Should Take Now To Address New Revenue Recognition Standards
New revenue recognition standards are just about here. Is your manufacturing business ready? If not, you need to educate yourself on how these changes will affect your business. All manufacturers and distributors will be affected by the new standards. Gilmore Jasion Mahler's Mike Brough compiled this mini to do list to get you started.
- Develop a revenue recognition team to help lead the efforts. This will require involvement from individuals throughout your business (not just the accounting department).
- Review the five step approach (as outlined in our recent GJM revenue recognition blog), as this will allow for your team to identify areas where you’ll see the biggest changes.
- Decide whether to adopt the full retrospective (updating prior years) or a modified retrospective approach.
- Review existing and soon-to-be entered into contracts/agreements to see if there are performance obligations embedded in the contract/agreement. Some of these contracts/agreements may need to be revised prior to the effective date (good idea to revise a year prior) of the new standard.
- Touch base with your information system provider to see how they will be assisting their customers with the new revenue recognition standard.
- Review your bank covenants with your financial institution as the new revenue recognition standard may have a negative impact on your covenant and might require an amendment.
- Review your current profit sharing calculations as delayed or early revenue recognition may have a significant impact on payouts.
Remember, the clock is ticking. Parts of the new standard go into effect for periods beginning after December 15, 2017 for public entities and for periods beginning after December 15, 2018 for all other entities. If you have questions or concerns, you should discuss them with your accountant.
GJM is the largest locally owned public accounting firm in Northwest Ohio. Whether you have a small business or a huge conglomerate, contact us to find out how we can help you prepare for the change.
GJM’s Mike Brough contributed this blog. Mike is a partner in the Gilmore Jasion Mahler assurance department. With over 13 years of public accounting experience, Mike works in a variety of industries, including manufacturing & distribution, government, and nonprofit operations.
