Revenue recognition is an important element of financial accounting. It allows your business to keep track of the revenue stream and create the ideal income statements. Prior to the unified standards, different companies use different accounting standards for revenue recognition. However, now we have a standard like the ASC 606 and IFRS 15, which is acknowledged by both the FASB (Federal Accounting Standards Board) and the IASB (International Accounting Standards Board).
As part of the new ASC 606 guideline, companies will need to compare books with the ASC 605 guidance. Let’s briefly describe the ASC 605 standard and then share the benefits of automated revenue recognition that makes it easy to compare and comply with the new accounting standard.
ASC 605 is a transaction-based revenue recognition standard as opposed to contract-based like ASC 606 and IFRS 15. It describes situations where transactions are recorded in terms of generating revenue. It includes recording details for the rendering of services and the sale of physical goods. It also includes details of how the conversion to monetary assets can be defined when recognizing revenue for a business entity.
This standard also covers some specific industries like the software industry, which has its own set of situations which are different from other scenarios. It provides guidance for situations where a customer will receive multiple deliverables. It covers revenue reporting for different situations where sums must be paid to other involved parties in the business. It defines the use of milestones that are common in digital businesses as well as covers vendor-based considerations for customers.
There are several benefits of using a cloud-based software tool like RevSym that allows automated revenue recognition that follows ASC 605 in addition to ASC 606. Since companies will need to do a comparison of ASC 605 and ASC 606, it makes sense to automate revenue recognition for both standards. Here are some top advantages:
Compliance of the new accounting standards is required. But when companies automate revenue recognition it ensures company enjoy compliance. All the rules of the recognition standard are built into the software solution. Finance analysts can configure all the company’s policies without coding or IT assistance. All reports and disclosures required for compliance are built into the software.
Since the ASC 606/IFRS 15 standard is now globally acknowledged, you can implement automated revenue recognition that can cover international businesses. You end up receiving reports that are universally employed and ensure that you can comply with the legal requirements for accounting in a multitude of environments. With your performance easily measurable, it is possible to use your current figures to make important financial decisions for your business.
Single Source of Truth
RevSym becomes your subledger to your general ledger. The application is supported by efficient data centers and provide you enhanced data security versus keeping the information in your physical offices or on spreadsheets.
You can enjoy these benefits when you employ RevSym by CallidusCloud. It complies with the old and new accounting standard and is configurable to support revenue recognition for a variety of industries.
Webinar: Accounting for Commissions and Other Contract Costs under ASC 606
In this webinar, Matt Svetich of Effectus Group will discuss what to consider when preparing for the commission accounting changes under ASC 606 and ASC 340-40.
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