The latest study of implementation efforts around the new revenue recognition accounting standard suggests many companies may still be dragging their feet in preparing to adopt the new requirements.
In a survey of 335 finance executives by PwC and Financial Executives Research Foundation, 27 percent of executives said their companies had not yet started an initial impact assessment of the new standard as of summer 2015, and 48 percent had started, but not completed the assessment. More than three-fourths said they could not quantify the financial statement effect of adopting the new standard.
When PwC conducted a webcast recently to explain the survey findings, the webcast poll of an estimated 3,000 participants revealed similar results; one-third had started but not completed the assessment, and nearly one-fourth had not yet begun the assessment. Dusty Stallings, a PwC partner, found the results disturbing. “It’s a very challenging place to be if you haven’t started the assessment,” she said. “It’s very difficult to know what else you need to do to be prepared for this standard. There is still a good pocket of the population that hasn’t gotten going yet.”
The PwC/FERF survey found 20 percent of executives who said they had completed the initial impact assessment, and 5 percent who said they had started to implement systems, controls, and process changes to comply with the new standard. In the more recent webcast poll, 15.5 percent said they had completed the assessment and 3.2 percent said they had begun to put systems, controls, and process changes into place.
Where companies said they had not yet begun their assessments of how the new standard will affect their organizations, the survey asked for reasons. Nearly 40 percent said they didn’t believe the impact would be significant on the company’s financials, while 18 percent reported resource constraints. Stallings suggested executives dig out their calendars and map out a time line around their known peak work periods to assure time is allowed for adoption activities.
Another 14 percent said they were waiting for clarification on additional accounting topics, and 13 percent said they were waiting for final guidance from standard setters. (Both the Financial Accounting Standards Board and the International Accounting Standards Board are making revisions meant to clarify certain aspects of the standards to address questions that have surfaced during implementation.)
The new accounting standards take effect under both U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards in 2018 after both boards deferred the effective dates by one year. Stallings urged companies to undertake a “measured, phased approach to implementation,” beginning with an assessment to determine what changes are required. “It’s a very large elephant to eat in one bite,” she said.