Companies that are on the front of the curve in implementing the new revenue recognition standard are finding it a daunting task requiring major planning and coordination.

At Compliance Week’s annual conference this week, Bavan Holloway, vice president of corporate audit at Boeing, said companies need to have a strong change management process in place to plan for and drive the implementation of the new accounting standard. “It’s really complicated, and critical to have all the right folks involved,” she said.

“We’re working with subject matter experts, major business units, senior accounting people, and financial planning and analysis, the tax organization, finance systems, IT folks.”

Companies that want to present three years of financial information under the new standard will need dual systems tracking revenue. “How are we going to do this?” Holloway said. “It’s data, data, data -- understanding all the different elements you have to have in place.” Establishing an operating rhythm and assuring all the right players are engaged and communicating is critical, she said. “It’s very challenging.”

Tim Mullis, revenue convergence program lead for McKesson Technology Solutions, said his company will be heavily affected by the new standard because of the big differences in the accounting for software under the new standard. Under current rules, software can be assigned, essentially, the residual value in a multiple-element arrangement after revenue had been assigned to other aspects of the arrangement, he said. “Now software gets fair value revenue allocation,” he said.

Technology companies in particular will have a lot of work to do to address how they will unwind deferred revenue currently sitting on their balance sheets, said Mullis. Under existing accounting rules, companies cannot recognize revenue for elements of an arrangement to which they can’t readily assign value, Mullis said, so the amount resides on the balance sheet until revenue can be recognized. The new standard does not have a provision for deferring revenue in the same way, he says. “You have to write it to retained earnings,” he said. “That’s a big change for a lot of companies.”

Jeff Kammerer, a partner in risk assurance at PwC, said deferred revenue is an issue companies will need to address as part of their transition to the new standard. It will be most prevalent in sectors such as technology,  aerospace, defense, energy, mining, engineering, construction, and some aspects of pharmaceuticals, he said.

Companies like Boeing and McKesson, in Kammerer’s view, are among about 20 percent of companies that are furthest along in preparing for the new standard. The Financial Accounting Standards Board has proposed a one-year delay in the effective date of the standard, pushing it out to 2018, to give companies more time to prepare. The International Accounting Standards Board is proposing a similar delay for companies following International Financial Reporting Standards as well.

“If it hasn’t hit home yet, it’s time to get started if you haven’t already,” said Kammerer. “There’s a one-year delay in terms of the effective date, but the view is that doesn’t mean you can put your feet up and wait.”