Software as a Service is supposed to be quick and easy, right? A company simply pays a subscription and leaves the rest to the SaaS provider. Better yet? SaaS customers are entitled to the latest and greatest from their vendors as the software continually improves over time. Compared to the old days of on-premises software, which required lengthy and expensive implementations to install and customize software on the customer’s own servers, SaaS is a big improvement.
The new ASC 606 and related 340-40 accounting standards require companies make some fundamental changes in how they handle revenue recognition. Even though the deadline for compliance for publicly held companies has already passed, it appears that many companies are still struggling to meet the new requirements for accounting for revenue from customer contracts.
One of the main purposes of the Financial Accounting Standards Board’s new revenue recognition standard, ASC 606 and IFRS 15, is to eliminate industry-specific guidance in order to create more consistent reporting across all types of organizations. That means its effect will vary depending on your industry, from “no big deal” to a “very big deal.” Software and technology fall very much into that latter category.
The Financial Accounting Standards Board’s new revenue recognition standard, ASC 606—the biggest accounting guidance change in recent history— has two main objectives. The first, and probably most important, is to eliminate industry-specific guidance in order to create more transparent and uniform reporting across all types of companies. In other words, to allow for a more generic, apples-to-apples comparison among companies and industries, no matter how diverse.
Recognizing revenue for a gaming company is complex—especially now under ASC 606 and IFRS 15. If you’re in the industry, you know, it’s like any software company but with a layer of complexity on top. There’s a high volume of customers making online purchases of video games and other in-game purchases (also known as microtransactions).
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.
If you are reading this blog post, I am going to assume you arrived here because of your interest in or responsibility for revenue recognition. For the last couple of years there has been countless articles, blogs, webinars, conferences, etc. about the new revenue recognition standard ASC 606 and IFRS 15 internationally. You’ve probably seen them all but are still looking for more.
ASC 606 (or IFRS 15 internationally) compliance—the biggest accounting guidance change in recent history—is already past due for public companies. It became effective at the beginning of this year, but many private companies still haven’t even started implementation.