Are you ready for the Financial Accounting Standards Board’s (FASB's) new revenue recognition standard? If they answer is yes, you're in the minority.

The deadline for compliance is 1 January 2018 but a poll by Deloitte and Bloomberg BNA has found that almost 70 per cent of companies have not yet decided on their approach to the new standard.

The revenue recognition standard (Accounting Standard Codification (ASC) 606) changes the accounting treatment for revenue, affecting all companies that have contracts with customers.

However, with less than six months to the deadline, experts warn that the implementation process requires substantial time and resources. Deloitte & Touche's Eric Knachel said: “Companies should not underestimate what a significant undertaking implementation will be.”

The poll also found that:

• 52 per cent of companies do not expect the revenue recognition standard to have a material impact on their company’s financial statements
• 45 per cent have not started to assess disclosure requirements while implementing the recognition and measurement principles;
• 56 per cent have not yet established a budget for implementation;
• 30 per cent are hiring external resources to help manage the accounting changes.

Get ready for revenue recognition

So it seems that many companies still have considerable preparation work to do before the beginning of next year. Neglecting this could be a serious oversight that could further delay the standard's implementation process. Knachel adds: “Companies should recognize that while the standard might not affect balance sheets or income statements in some cases, it can still have a significant impact on related disclosures. A significant risk around revenue disclosures is a potential loss of investor confidence and a decrease in shareholder value.”

So what should you do to ensure your company is ready to comply with the FASB revenue recognition standard?

• don't underestimate how long implementation might take – allow enough time;
• be aware that the standard might affect a number of different accounting areas;
• establish a budget for compliance;
• consider using the services of a third party to help manage the accounting changes.

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CTMfile take: This new FASB revenue recognition standard is for companies reporting under US GAAP (generally accepted accounting principles). For companies that don't report under US GAAP, IFRS 15 will apply. Deloitte has more info on this here.