Companies still have some time before they must begin applying the new standard for revenue recognition but many seem to be making slow progress in preparing for the change.
According to a KPMG survey, less than 29% of corporate financial preparers say their companies have a clear plan to implement the new standard, with less than 13% saying they have completed an assessment of the effects of the new standard and are planning implementation.
As many as 82%, however, say they are still assessing its effect or have taken no action while they await the completion of the standard setting.
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued their converged standard on revenue recognition in May 2014. The standard is intended to increase financial statement comparability across companies and industries and significantly reduce the complexity inherent in today’s revenue recognition guidance.
The standard is still undergoing clarifying changes as a result of questions raised with the boards. In July, both FASB and IASB voted to delay the effective date of the new revenue recognition standard by one year.
The boards are also working on new lease accounting standards. Just 13% of the KPMG survey respondents said they have a clear plan for implementation of those standards and most participants expect to implement them in 2018 or 2019.
“Both standards will require significant effort, and these results demonstrate the complexity of implementation across entire organizations,” John Ebner, KPMG’s national managing partner–audit, said in a news release.
Public companies, some nonprofits, and some employee benefit plans must apply the new revenue recognition standard in annual reporting periods beginning after Dec. 15, 2017, including interim reporting periods within that reporting period. Other entities have an additional year for implementation.