In a recent interview with CFO.com, Christoph Hütten, chief accounting officer for SAP, discussed the readiness (or lack of readiness) of companies for meeting the new RevRec standards, ASC 606 and IFRS 15.
Hütten has a broad understanding of the issues, having served from 2009 to 2014 on the IFRS Advisory Council for the International Accounting Standards Board, during the period when IASB issued two exposure drafts of the new standard and published the final rule.
For the past four years Hütten has been part of the Joint Transition Resource Group for Revenue Recognition, formed by the U.S. and international standard setters after the standard’s 2014 publication to answer questions and clarify uncertainties around its application.
According to Hütten, most companies are ready to produce a revenue number for the first quarter. But a majority of those are using what he describes as “interim processes.”
“I see a lot of companies underestimating it,” says Hütten. “They don’t see a big issue for revenue on the face of their income statement. But at some point somebody will be looking at the very detailed disclosures that are required and realize they’re not prepared to make them.”
A key take-away from this article is that companies should not underestimate the complexities of achieving compliance and the importance of implementing automated solutions that can seamlessly mesh revenue recognition with overall accounting processes and business systems.