In the past year, COVID-19 has completely changed the world we live in, and no business has been immune to these changes. In addition to transforming the way businesses operate day to day, COVID-19 has also affected the way businesses perform even their most core processes, including revenue recognition.
What is ASC 606 revenue recognition?
ASC 606 is an accounting standard that provides a framework for businesses to recognize revenue more consistently and in alignment with contractual performance obligations made to their customers. This standard, which became effective Q1 2018 for most public business entities and in 2019 for many non-PBEs (public business entities), affects all public and private companies.
- Identifying the contract with a customer
- Identifying the performance obligations in the contract
- Determining the transaction price
- Allocating the transaction price
- Recognizing revenue as the entity satisfies a performance obligation
AICPA pushes for deferred implementation of ASC 606
In light of COVID-19, many businesses have been forced to take another look at how they can meet ASC 606 compliance. On the April 8, 2020 FASB board meeting, the FASB voted to consider a one-year delay for franchisors in the effective dates of ASC 606.
In May 2020, the AICPA Technical Issues Committee (TIC) wrote a comment letter suggesting that any private company should be able to defer implementation of the revenue recognition standard for one year, due to the tremendous challenges posed by the new remote work environment and new priorities in light of COVID-19.
The FASB responded, adjusting the regulation; for private companies and private not-for-profits, the effective date will be for fiscal years beginning after Dec. 15, 2021 and interim periods within fiscal years beginning after Dec. 15, 2022.
Deferral of adopting the revenue recognition standards is not mandatory; some businesses may choose to adopt ASC 606 as originally scheduled. Depending on where you are in the implementation process, you may choose to take this route, particularly if it would be more cost-effective for internal stakeholders.
How Ordway supports ASC 606 compliance
Not sure where your business stands when it comes to ASC 606 compliance? Here are six ways the Ordway platform supports ASC 606 adjustments:
- Interpretation of the ASC 606 accounting standard
- Auditable source of truth for contract details
- Flexibility to absorb mid-contract changes
- Documented transaction price
- Allocate revenue to individual performance obligations
- Recognize revenue when performance obligation is met
One of our customers, QuPOS, found themselves faced with new challenges when the pandemic began impacting their customers.
“We have requested some assistance from our vendors, as our customers are also needing help. I found it very easy in Ordway to add a discount line, like a new product or new feature in each subscription, and we can enable those discounts, we can reduce their billing, we can suspend invoicing, for the time being. Whatever way we need to manage our customers or their expectations, we are able to get that through Ordway. Whatever requirement we came through in this tough period, Ordway always helped us to get very quick support,” said Sachin Agarwal, Controller and Head of HR at QuPOS.
The Ordway billing and revenue automation platform helps businesses recognize revenue, eliminating the need for spreadsheets and manual workarounds, while allowing teams to focus on higher value activities. With Ordway, companies can close financial periods up to 90% faster in accordance with GAAP and IFRS 15 accounting standards. Request a demo today and see how Ordway can transform your business.