The new revenue recognition standard: Are you prepared for change? 2014 Revenue Recognition Survey
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The new revenue recognition
standard: Are you prepared
for change?
2014 Revenue Recognition Survey
November 2014Overview B The New Revenue Recognition Standard
In May 2014, the Financial Accounting systems, processes, and internal
Standards Board (FASB) and the controls that might be needed to
International Accounting Standards capture new data and address changes
Board (IASB) issued new, converged in financial reporting.
standards for revenue recognition (the
“standard”), applying to all contracts Are companies ready to comply with
with customers (ASU No. 2014-09, the new standard? Do they have
Revenue from Contracts with Customers implementation strategies in place,
(Topic 606), and IFRS 15, Revenue from and have they prepared for the
Contracts with Customers). associated costs? To understand the
state of implementation efforts, PwC
Companies generally have two and Financial Executives Research
options to adopt the standard: a full Foundation (FERF) conducted a
retrospective implementation requiring survey in the summer of 2014. Survey
a recast of comparative periods questions focused on areas of the
presented back to 2015, or a modified standard that companies believe to be
retrospective implementation, which the most challenging and are expected
generally requires the adoption of the to result in significant financial
standard prospectively on the effective statement and operational impacts.
date in 2017. The survey also explored the broader
impacts of the standard on multiple
With the issuance of the new revenue functional areas, expected transition
recognition standard, companies are approaches, and the ability to meet the
starting to evaluate plans to implement adoption deadline.
the standard by January 2017 for
public companies applying U.S. GAAP “The revenue recognition standard
and January 2018 for non-public will eliminate a major source of
companies.1 Nearly all companies will inconsistency in GAAP, which currently
be affected to some extent, either by consists of numerous disparate,
the significant increase in required industry-specific pieces of revenue
disclosures or by potential changes recognition guidance.”
to current industry and accounting — Russell Golden, FASB chairman,
practices. May 28, 20142
Companies may need to consider the
changes to information technology
1 In connection with the issuance of the new
revenue standard, the FASB and IASB established
a joint working group, the Transition Resource
Group (TRG), to seek feedback on potential
implementation issues. At its October 31
meeting, the FASB announced it will be performing
outreach over the next several months to assess
whether a delay in the effective date of the
standard is warranted. The FASB plans to reach a
final decision about whether to delay the effective
date no later than the second quarter of 2015. The
IASB did not comment on a potential delay of the
standard’s effective date. For more information,
visit: http://www.pwc.com/us/en/cfodirect/
publications/in-transition 2 www.journalofaccountancy.com/News/201410215
1Survey demographics 2 The New Revenue Recognition Standard
Respondents by annual revenue (N=174)
50
44
40
40
30
22
18
20 16
14 13
10 7
0
Less $100 million $500 million $1 billion $2 billion $5 billion More No response
than to to to to to than
$100 million $499 million $999 million $1.99 billion $4.99 billion $9.99 billion $10 billion
Respondents by broad industry (N=174)
8%
CIPS
9%
TICE
Financial Services
42%
Health Industries
15%
No response
26%
A total of 174 respondents completed (CIPS); technology, information, not fully assessed how implementation
the survey. Of these, 63% represent communications, and entertainment will impact existing revenue policies,
public companies and 37% represent (TICE); financial services; and processes, systems, reporting, and
private companies. 91% are U.S. health industries. commercial operations, as well as the
Generally Accepted Accounting costs to implement these changes.
Principles (GAAP) reporting companies Results from the PwC-FERF survey
and 9% represent International indicate that while most companies are “Our attention now turns to ensuring
Financial Reporting Standards (IFRS) familiar with the standard3, they have a successful transition to these
reporting companies. Respondents new requirements.”
are from companies of all sizes based — Hans Hoogervorst, IASB Chairman,
on annual revenue, from less than 3 Update no. 2014-09—Revenue from contracts May 28, 2014 4
with customers (topic 606) section a—summary
$100 million to more than $10 billion. and amendments that create revenue from
Respondents also represent a variety contracts with customers (topic 606) and other
assets and deferred costs—contracts with
of industries, including consumer customers (subtopic 340-40)
4 www.journalofaccountancy.com/News/201410215
industrial products and services
3Key findings from the survey 4 The New Revenue Recognition Standard
In analyzing the responses, a number suggest that several other functional location, although they are not
of overall findings became clear. areas will be impacted and involved as geographically dispersed
in the implementation process. as company contracts. Many
Overall, companies are familiar companies also have a number of
with the standard but they have not • Areas of highest impact relate “feeder” systems involved in the
fully assessed the potential impacts. to increased judgments and overall revenue cycle. Almost 60%
Respondents predict that the areas disclosures—Provisions of the of respondents said they believe
of highest impact will be judgments standard that are expected to be adoption of the standard will require
and disclosures, as well as related complex and judgmental—and a parallel reporting system. Seventy-
system and process changes. They result in the largest financial seven percent of respondents said
also intend to place significant effort reporting and operational impacts— that they expect to make some to
on contract reviews and evaluation of are fairly consistent. They include significant changes to systems, while
systems modifications. applying the variable consideration 23% expect to make no changes.
constraint, determining distinct The majority of respondents
While most do not foresee changes to performance obligations, evaluating indicated that the time required to
business models, many believe that contract modifications, and implement system changes will be
impacts to non-revenue arrangements estimating standalone selling six months to two years.
such as compensation may be prices of performance obligations.
pervasive. When it comes to material Responses indicate that companies • Changes are expected to internal
financial statement impacts, companies anticipate difficulty in dealing controls and other arrangements,
were fairly evenly split. Respondents with areas of revenue recognition but limited impact to business
from the TICE industries generally in which significant judgment will models—A majority of respondents
expect more material impacts relative be required. The most significant indicated that at least some
to the other industries. The method increased operational effort will be changes to their company’s internal
of adoption is still being evaluated, preparing the required disclosures controls would be necessary. Few,
but just over one-half of respondents under the standard. however, believe that the standard
(of those that answered the question) will require changes in business
believe that sufficent time has been • Significant level of effort will be models. Companies expect the
provided to adopt the standard using required to review contracts— standard will affect other non-
the full retrospective method. Contracts are sometimes revenue arrangements, such as
geographically dispersed or only compensation, and the majority of
Following are key takeaways from somewhat centralized within respondents were unsure if they
the survey: companies. Survey respondents would be able to successfully modify
expect contract reviews to be critical these arrangements to keep their
• Most are familiar with the to the overall implementation effort, companies in substantially the
standard5—A majority of with a majority of respondents same economic position. At this
respondents (54%) said they are indicating that they expect these point, most companies have not yet
familiar or very familiar with the reviews will require moderate to determined the cost to implement
standard. Those in the finance significant effort. the standard.
function of companies seemed
to have the greatest level of • Considerable systems changes
knowledge. The responses, however, are anticipated—Systems are
typically not centralized in one
5 For an overview of the standard, visit www.pwc.
com/us/revrec
5• No consensus on the method We hope you find this 2014 revenue of adoption and timeline— recognition survey informative Respondents were fairly split in and helpful. PwC and FERF may be their responses related to method conducting a follow-up survey on the of adoption plan: 12% expect to use standard next summer to analyze how the full retrospective method (with companies’ responses evolve as they or without practical expedients) and evaluate the effects of the standard 12% expect to employ the modified and prepare for adoption. retrospective approach. The rest were unsure or did not answer the question. While 28% of respondents said they would be more likely to use the full retrospective method, if given another year to comply, only 18% were willing to give up the modified retrospective method in exchange for an additional year to adopt the standard. Respondents also showed no firm consensus on whether they could meet the 2017 deadline to implement the standard using the full retrospective method. Slightly more (29%) said they would be able to meet the deadline than those that indicated they could not (25%). 6 The New Revenue Recognition Standard
General familiarity with somewhat or very familiar with the
the standard standard, and those in the finance
group seemed to have the greatest
We asked survey participants to
level of knowledge. Respondents
describe their familiarity with the
representing all other functions have
standard, both overall and by function
not considered the standard or only
within the company. A majority (54%)
somewhat considered it.
of respondents indicated they were
Overall ASU 2014-09 familiarity (N=174 )
17% Somewhat familiar
30% Very familiar
8% Not familiar
Familiar
8% No response
37%
ASU 2014-09 familiarity by functional team
80
70
60
50
40
30
20
10
0
Finance Tax Info Tech Operations Sr. Executives Audit Board of
Committee Directors
It has not been considered yet It has been moderately considered
It has been somewhat considered It has been significantly considered
7Anticipated impacts be very challenging. Companies 5. Determining the impact of
recognize revenue earlier under the collectibility threshold:
We asked survey respondents to the standard by building in variable Respondents rank collectibility,
identify specific areas within the consideration estimates at inception for which the standard provides
standard that are expected to result in of contracts, which is a change from a lower threshold, as among the
the following impacts: current guidance. most challenging technical impacts.
Companies for which collectibility
• Technical accounting challenges and 2. Determining the impact of is not probable will not be able to
significant judgments; contract modifications: While default to a cash basis to recognize
the standard now provides more revenue, and the cancellation of
• Largest financial reporting explicit guidance in contract the contract may be the trigger to
impacts; and modifications, it is expected to be a recognize revenue for amounts
judgmental and challenging area. received. In these cases, it may be
• Largest operational efforts Contract modifications will require very judgmental to determine when
a contract-by-contract decision on a contract has been canceled.
Interestingly, there was significant whether a modification results in
overlap between the accounting and a separate contract, a termination
financial reporting concerns and of the old contract and creation
anticipated operational changes. of a new one, or remains the
same contract.
Five areas are expected to be the most
challenging/judgmental to determine
3. Determining whether goods
the appropriate accounting from a
technical accounting perspective. and/or services are “distinct” in
These are: multiple deliverable agreements:
Using the criteria and indicators in
1. Applying the variable
the standard to determine whether
consideration constraint: While
goods and/or services are distinct in
estimating variable consideration
multiple deliverable agreements is
may better represent the economics
also expected to be a challenge.
of a company’s transactions,
estimating the amount of 4. Estimating the standalone
consideration a company expects selling price of performance
to be entitled to (subject to being obligations: Some companies will
probable (U.S. GAAP) or highly have to perform new estimates
probable (IFRS) of no significant for standalone selling prices of
revenue reversals, e.g., “the items, which are expected to
constraint”) will require substantial require new processes and controls
judgment. If the full amount of to ensure documentation and
variable consideration does not consistent application.
meet the constraint to be recognized
as revenue, companies believe that
estimating some minimum amount
that does meet the constraint will
8 The New Revenue Recognition StandardAreas of the standard that respondents expect to be the most challenging/judgmental
from a technical accounting perspective (N=174)
Applying the variable consideration constraint
Determining whether items are “distinct” in multiple component arrangements
Determining the impact of contract modifications
and/or whether contracts should be combined
Estimating the standalone selling price of performance obligations
Determining the impact of the “collectibility threshold”
Determining the allocation of the transaction price
to separate performance obligations
Determining what is in scope of the standard, including
identifying which party is the customer
Determining whether a performance obligation is satisfied
at a point in time or over time
Determining whether a contract with a customer provides
the customer a material right
Determining whether a significant financing component exists
Determining whether (or when) the parties are committed to
perform their obligations under the contract
Applying the cost capitalization guidance in the standard
Determining the best measure of progress for satisfying performance obligations
and when adjustments may need to be made
Determining whether a license of intellectual property is “dynamic” or “static”
Determining whether the entity is acting as a principal or an agent
Determining whether variable consideration is subject to the
sales/usage based royalty exception
Determining the accounting for arrangements with repurchase agreements
Determining whether the bill-and-hold criteria are met
0 10 20 30 40 50
“1” Rankings “2” Rankings “3” Rankings “4” Rankings “5” Rankings
“1” Rankings Most Challenging; “5” Rankings Least Challenging
9The following five areas are expected 4. Timing of revenue recognition: Most companies have not yet
to result in the largest financial Significant changes in the timing of quantified the financial statement
reporting impact: recognition (e.g., at a point in time impact of the standard. In fact, only
1. Separation of “distinct” or over time) may result for some 10% of respondents said they have
performance obligations: companies as they evaluate the attempted to quantify the financial
Companies may have greater or standard’s criteria for recognizing statement impact. More than one-third
fewer performance obligations revenue over time before they can (35%) said they have not done so,
than deliverables under the current use a point in time. while 55% were either unsure or did
guidance, and separating distinct not answer the question.
performance obligations is expected 5. Scope: The scope, including
to have a significant impact. transfers of assets that are not an
output of a company’s ordinary
2. Collectibility: The model for activities, will be an important
collectibility changed throughout area to evaluate and may result
re-deliberations of the standard in significant financial reporting
and was one of the final decisions changes. This will be particularly
reached by the FASB and IASB. As challenging if agreements
a result, companies may not fully contain revenue and non-revenue
understand the new requirements. performance obligations.
Alternatively, respondents may
understand that in instances in
which collectibility is not probable,
companies cannot simply default
to cash-basis accounting. This may
result in a substantial impact for
some companies.
3. Variable consideration: Variable
consideration may have a substantial
impact due to accelerated timing of
revenue recognition, since revenue
recognition will not automatically
be delayed when amounts entitled
to are not fixed or determinable, or
when the amounts are contingent.
10 The New Revenue Recognition StandardAreas of the standard that respondents expect to result in the largest financial reporting impact (N=174)
Separating “distinct” performance obligations
Variable consideration
Collectibility
Scope, including transfers of assets that are not an output
of an entity’s ordinary activities
Timing of revenue recognition
Allocating the transaction price to separate performance obligations
Removal of the current contingent revenue rules
Accounting for licenses’ recognition
Contract modifications and/or combinations
Estimating the standalone selling price of performance obligations
Options to acquire additional goods or services
Principal versus agent
Time value of money
Measuring progress toward satisfying performance obligations
Bill-and-hold arrangements
Contract cost guidance
Parties must be committed to perform their respective
obligations under the contract
Sales- and usage-based exception for licenses of intellectual property
Accounting for repurchase agreements
0 5 10 15 20 25 30 35 40
“1” Rankings “2” Rankings “3” Rankings
“1” represents the greatest impact, “2” represents moderate impact, and “3” represents minimal impact
11Attempted to quantify the financial statement impact (N=174)
35% No
13% Not sure
Yes
No response
10%
42%
Expect material impact to income statement and/or balance sheet (N=174)
23%
No
19% Not sure
Yes
17% No response
41%
When it comes to material impact to The percentage of respondents who
the income statement and/or balance expect a material impact compared to
sheet, 53% said they do not expect those who do not was fairly consistent
material impact, while 47% said across sectors, except for the TICE
they do (of those that responded to the industries which are more likely to
question). be impacted.
12 The New Revenue Recognition StandardExpect material impact to income statement and/or balance sheet (by industry)
40%
35%
31%
30
25%
20
13%
11% 11%
10 8% 7%
0
TICE CIPS Financial Services Health Industries
Material impact expected No material impact expected
Five areas are expected to result in the 3. Variable consideration: Some
largest increase in operational effort. companies may find it a significant
These are: challenge to estimate variable
consideration, evaluate the
1. Disclosure requirements: The constraint on revenue recognition,
standard requires substantial and update estimates.
disclosures around revenue,
requiring the preparation of 4. Collectibility: Companies can no
computations and data, particularly longer simply default to the cash
for companies with long-term basis when collectibility is not
contracts. As a result, companies probable at the inception of an
will need to evaluate how to best agreement. For situations in which
capture and track data to meet these collectibility is not probable, it
new requirements. may be an operational challenge
to identify the trigger to recognize
2. Separating “distinct” any cash received (since the receipt
performance obligations: Given of cash is no longer the automatic
that some companies may have trigger to recognize the revenue).
more performance obligations when
compared with current units of 5. Contract modifications:
accounting, separation of distinct Companies may find it difficult to
performance obligations may be identify modifications, determine
operationally challenging. This which model for modifications
may be particularly difficult with within the standard applies,
allocation of consideration across and then accurately capture
increased performance obligations. the information to report the
financial impact.
13Areas of the standard that respondents expect to result in the largest increase in level of effort operationally (N=174)
Disclosure requirements
Variable consideration
Separating “distinct” performance obligations
Collectibility
Scope, including transfers of assets that are not an output
of an entity’s ordinary activities
Contract modifications and/or combinations
Estimating the standalone selling price of performance obligations
Timing of revenue recognition
Inventorying agreements
Measuring progress toward satisfying performance obligations
Parties must be committed to perform their respective
obligations under the contract
Contract cost guidance
Time value of money
Removal of the current contingent revenue rules
Principal versus agent
Allocating the transaction price to separate performance obligations
Accounting for licenses’ recognition
Sales- and usage-based exception for licenses of intellectual property
Bill-and-hold arrangements
Accounting for repurchase agreements
Options to acquire additional goods or services
0 5 10 15 20 25 30 35
“1” Rankings “2” Rankings “3” Rankings
“1” represents the greatest increase in level of effort, “2” represents moderate increase in level of effort, and “3” represents minimal increase in level of effort
Significantly more related to revenue as a result of the
disclosures predicted standard, a majority said they predict
significant additional disclosures, and
When asked more detail about whether
more often at the entity level than the
respondents expect more disclosures
segment level.
14 The New Revenue Recognition StandardDo you expect more disclosure related to revenue as a result of the standard? (N = 174)
50
44
40 35
29
30
23
20
20 17
10 6
0
Significantly Significantly More at an More at a Not sure No No response
more at an more at a entity level segment level
entity level segment level
Centralization of contracts (N=174 )
Centralized in one location
22% 23%
Don’t know
Geographically dispersed
2%
Somewhat centralized in very few locations
16% No response
37%
Contracts– Almost half (49%) of respondents
said they expect to expend significant
Landscape and level effort on contract reviews, 26% predict
of effort to review moderate effort will be required, 18%
expect to expend some effort. Only 7%
When asked whether companies’ said contract reviews would require
contracts with customers are centrally little to no effort (percentages were
located or geographically dispersed, calculated excluding those that were
37% of respondents said contracts unsure or did not answer the question).
are geographically dispersed, 16% The general consensus appears
indicated that they are somewhat to be that at least moderate effort
centralized in very few locations, will be needed to perform contract
and 23% said they are centralized in reviews. Depending on the geographic
one location.
15Level of effort on contract reviews (N=174)
80
70
61
60
50
38
40 33
30 22
20
9 11
10
0
Significant Moderate effort Some effort Little to no Don’t know No response
effort effort
dispersion of those contracts and the Systems: Landscape
accessibility, it may be difficult for
some to even locate the contracts. and extent of
Further, more dispersed contracts may changes
make it more challenging to coordinate
efforts around the globe and reach Systems involved in the revenue cycle
consistent decisions. tend to be more frequently centralized
in one location as compared with
contracts. In fact, 30% of respondents
said their systems are centralized in
one location, and 21% said systems
are somewhat centralized in very few
locations. One in four respondents said
their systems are decentralized.
16 The New Revenue Recognition StandardCentralization of accounting systems (N=174)
Decentralized
25%
30% Don’t know
Somewhat centralized in very few locations
Centralized in one location
2%
No response
21%
22%
Number of feeder systems impacted (N=174)
50 46
44
40 37
30
21
20 16
8
10
2
0
1–3 4–9 10–19 20–29 30+ Not sure No response
Respondents said that feeder systems When asked whether they expect
frequently involved in the revenue to make changes to IT or enterprise
cycle will also be impacted. Of those resource planning (ERP) systems
respondents who noted one or more as a part of implementation, most
feeder systems would be impacted (77%) said they expect to make
(e.g., excluding those that are unsure some to significant changes, while
or did not answer the question), 48% 23% said they anticipate no changes
said that only one to three feeder (percentages were calculated
systems would be affected, and excluding those that were unsure or
29% noted that 10 or more feeder did not answer the question).
systems would be impacted. As
companies continue to work toward
implementation and get the IT function
more involved, it will be interesting to
see whether these numbers increase
over time.
17Extent of IT changes (N=174)
50 46
38
40
28
30
24
21
20 17
10
0
Significant Moderate Some None Not sure No response
changes changes changes
Since companies will be required And of those respondents who expect
to report results under both the old they will need a parallel reporting
and the new revenue recognition system (e.g., excluding those that
guidance for at least one year, survey are unsure, those that do not expect
respondents were also asked whether to need a parallel reporting system,
adoption of the standard will require and those that did not answer the
some form of parallel reporting system. question), 84% said that they believe
Fifty-nine percent of respondents said implementing the system will take
that they expect they will, while 41% at least six months; many expected
do not believe parallel reporting will implementation will take more than
be necessary. Responses from the more one year. For companies that need
highly affected TICE industries were parallel reporting and are considering
higher with 75% indicating that a the full retrospective option (which
parallel reporting system would would require calendar-year public
be needed. companies to start capturing the
information on January 1, 2015),
implementation will be a significant
challenge. Even among companies
that expect to use the modified
18 The New Revenue Recognition StandardThe need for a parallel reporting system (N=174)
18% No
22%
Not sure
Yes
No response
34%
26%
Length of time to implement (N=174)
48
50
40 37
29
30 25
20
20
10 7
5
3
0
1–3 4–6 6–12 1–2 2–3 Not Not applicable– No
months months months years years sure we do not response
expect to
retrospective option, the 2017 deadline Other anticipated
does not leave much time to determine
system requirements, configure the changes and the
changes, evaluate options and vendors, broader cost picture
and implement any new system.
Companies were asked to predict
how the standard would affect
broader areas such as their business
models, go-to-market strategies,
internal controls, and non-revenue
arrangements. Most were not certain,
so it’s not surprising that respondents
also said they are unsure about the
cost implications of compliance with
the standard.
19Expected change in internal controls (N=174)
50
42
40 37
31
30 27
22
20 15
10
0
Significant Moderate Some No Not sure No response
changes changes changes
expected expected expected
Anticipated changes to business model (N = 174)
57
60
50
38
40 33
32
30
20
6 8
10
0
Significant Moderate Some No Not sure No response
changes changes changes changes
expected expected expected expected
When asked about the potential need More than half (55%) of respondents
to implement process changes due said they do not expect to make
to the standard and the subsequent significant changes to business models
impact on internal controls, 87% of and/or how their company goes to
those who expected modifications market with customers. Only 14%
noted that they anticipate at least expect moderate to significant changes
some change in their company’s (percentages are based on those
internal controls. respondents who selected an expected
level of anticipated changes). Not
surprisingly, most of the 14% who said
that they expect to make moderate to
20 The New Revenue Recognition Standardsignificant changes to their business Estimated costs and
models are from the TICE industries, timeline to implement the
which are generally more affected by standard
the standard as compared to other
industries. It is clear that respondents do not
yet have a budget for the estimated
Many respondents predict the internal and external costs to
standard will affect other non-revenue implement the standard. This is
arrangements. These could include not surprising, as businesses are
compensation arrangements, debt continuing to evaluate the impact
agreements, shareholder/venture of the standard and the deadline for
agreements for investments held (e.g., implementation is more than two years
dividends entitled to or impacts pricing away. Almost two-thirds (64%) noted
in put or call formulas), and or vendor/ they are not sure or are still evaluating,
license agreements (e.g., company and only 13% had estimated an
is entitled to royalties based on a approximate budget; 23% skipped
percentage of revenue). Forty-nine this question. Clearly, companies
percent of respondents said that they are unsure of how significantly the
expect compensation arrangements to standard will impact their companies,
be affected, while 34% said they do not including all the various functional
expect impacts to other arrangements areas that will be involved in the
(percentages were calculated broader implementation efforts.
excluding those that are unsure or
did not answer the question). Again, The effective date of the standard is
there was a great deal of uncertainty: January 2017 (excluding U.S. GAAP
40% of respondents indicated they are non-public companies, which have
unsure whether other arrangements until 2018), and a significant number
would be affected (this percentage was of respondents said that deadline does
calculated excluding only those who not provide adequate time to adopt the
did not answer the question). standard using the full retrospective
method. One in four respondents said
Respondents are even more uncertain the timeframe is too short, while an
whether they would be able to amend equal number said they were not sure.
these arrangements to keep their Twenty-nine percent of respondents,
company in substantially the same however, said the timeline is adequate.
economic position. While 28% said Twenty-one percent did not answer the
they would be able to do so, only 4% question.
responded that they would not, and
68% were not sure. (These percentages
were calculated excluding those that
do not expect the standard to have
an impact on other arrangements
and those that did not answer
the question.)
21Does the effective date provide sufficient time to adopt using
the full retrospective method? (N = 174)
29% Yes
21%
No
Not sure
No response
25%
26%
To understand why many consider We were curious if companies expect
the timeframe too short, we to adopt the standard using the full
looked at the write-in responses to retrospective method or the modified
the deadline question. Of the 26 retrospective method. The results were
respondents who entered a response, fairly split, with 12% of respondents
only three represented companies choosing each of the methods, when
with revenues of less than $1 billion, combining full retrospective with and
perhaps suggesting that the effort without use of practical expedient(s).
required to fully implement the Given that it is still fairly early in the
standard is a greater challenge to implementation process and there
larger companies than to smaller are many factors to consider when
ones. Most write-in responses choosing the adoption method, it was
indicated that, in order to use the full not surprising that 56% of respondents
retrospective method, the standard were not sure, and that 20% skipped
would need to be broadly understood the question.
throughout their companies and that
the processes, systems, and controls
must be in place by 2015 to ensure
that financial reporting is accurate.
These respondents generally feel that
the deadline to achieve these steps
approximately seven months after
issuance of the standard is too short.
22 The New Revenue Recognition StandardPlanned implementation (N = 174)
6%
6% Retrospective (full)
Retrospective (full) with practical expedient(s)
No response
20%
Modified retrospective
56% Not sure
12%
Planned implementation (by industry)
Based on the responses, some Survey results show that more with many other issues, numerous
industries are more likely to opt for full respondents would use the full respondents were unsure or skipped
retrospective while others are more retrospective method if they were the question, possibly indicating that
likely to favor modified retrospective, allowed an extra year to adopt the they are in the earlier stages of their
as described above. Since the potential standard. Twenty-eight percent evaluation process.
impact of the standard varies by of respondents said they are more
industry, those likely to be more likely to opt for the full retrospective
significantly affected may be leaning method, while 15% said they
more toward modified retrospective, would not. However, when asked if
perhaps because they may not have companies were willing to give up
time to adopt the standard using the the modified retrospective option in
full retrospective method. exchange for an extra year to adopt
the standard, only 18% of respondents
said yes and 27% indicated no. As
23More likely to adopt using full retrospective, if provided one extra year (N = 174)
15%
21% No
Not sure
Yes
No response
36%
28%
Willing to give up modified for mandatory full, if provided one extra year (N = 174)
21% No
27%
Not sure
Yes
No response
18%
34%
24 The New Revenue Recognition StandardAbout PwC About Financial Executives
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25www.pwc.com/us/revrec To discuss the survey results in more detail, please contact any of the following PwC authors: James Kaiser Partner, IFRS and U.S. GAAP Change Leader PricewaterhouseCoopers (267) 330-2045 james.g.kaiser@us.pwc.com Farhad Zaman Partner, Deals (646) 471-5376 farhad.zaman@us.pwc.com Chad Kokenge Partner, Deals, Accounting Advisory Services Leader (646) 471-4684 chad.a.kokenge@us.pwc.com Brian Wiegmann Director, Deals (305) 375-7328 brian.c.wiegmann@us.pwc.com This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, its members, employees, and agents do not accept or assume any liability, responsibility, or duty of care for any consequences of anyone acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2014 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. The views set forth in this publication are those of the authors and do not necessarily represent those of the FERF Board as a whole, individual trustees, employees, or the members of the Advisory Committee. FERF shall be held harmless against any claims, demands, suits, damages, injuries, costs, or expenses of any kind or nature whatsoever except such liabilities as may result solely from misconduct or improper performance by the Foundation or any of its representatives. FERF publications can be ordered by logging onto http://www.ferf.org. Copyright © 2014 by Financial Executives Research Foundation, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means without written permission from the publisher. International Standard Book Number: 978-1-61509-169-0 Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by Financial Executives Research Foundation, Inc., provided that an appropriate fee is paid to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. Fee inquiries can be directed to Copyright Clearance Center at 978-750-8400. For further information, please check Copyright Clearance Center online at: http://www.copyright.com. MW-15-0778 AW
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