If the survey results from CallidusCloud’s recent webinar on adoption of the new revenue recognition standards, ASC 606 and ASC 340-40, are any indication of what’s going on in American business, this on-demand presentation couldn’t be more timely.
More than 65 percent of participants surveyed said they haven’t even started implementation of the accounting guidance. That’s a problem, considering that it became a requirement for publicly held companies at the beginning of 2018, and implementation for private companies begins January 1, 2019. But even if you’re in the latter camp, you may already be falling behind, because the full implementation process can take up to nine months, with three to five months just to implement the commission standards alone.
Sponsored by CallidusCloud, it’s hosted by Matt Svetich, a director in Effectus Group’s technical accounting and IPO practice, and Brian Aubuchon, a senior manager at Effectus serving clients in hardware, software, and SaaS industries. Both have extensive experience in ASC 606 revenue recognition implementations, as Effectus has completed over 50 ASC 606 projects in the last two months.
The focus of the webinar is on ASC 340–40, Contracts with Customers, meaning the expense side of sales contracts (revenue recognition is a whole other topic). Based on survey responses and questions asked at the webinar, there are still lots of misconceptions about the new accounting guidance, illustrating the need for the webinar and follow-up research. Svetich and Aubuchon discuss what to consider in preparing for commission accounting changes, methods for estimating commission amortization, and how to support audit requirements in the age of ASC 606.
Some of the topics discussed and questions answered include:
How should commission costs be amortized over the life of the sales contract?
How are commission and bonus clawbacks handled if the customer stops payment or management changes its policies?
How do you deal with contract modifications?
How are fringe benefits accrued?
Svetich and Aubuchon outline the challenges in implementing the guidance, including the immense effort in time, money, and resources required, relying on manual calculations in Excel, and not planning for scale. Unfortunately, more than 58 percent of those surveyed say they plan to use manual spreadsheets to track commissions, while 29 percent plan to use SaaS, with the remaining 13 percent planning to use a homegrown proprietary system.
Clearly, the best way to handle the new ASC 606 and ASC 340-40 requirements is to be informed and to get the right technology behind you.
Our webinar can help you get started on the first part, while RevSym from CallidusCloud can do the rest. RevSym is designed specifically to make the revenue and cost recognition adoption process much easier—because it’s automated. You can easily amortize the cost of sales or sales commissions for existing and new contracts, renewals, modifications, and cancellations. And because it’s cloud-based, it’s scalable, flexible, and upgradable.