The far-reaching implications of a new revenue model
Highlights Management should evaluate existing business practices under the new model, including how product or service offerings are bundled and priced, and begin assessing the need to negotiate revised contract terms. Industry-specific accounting guidance will be eliminated under the new model and “industry practice” will need to be re-evaluated. Estimates that are required to apply the new model will often require the use of greater judgment and may necessitate process or system changes. Companies should begin assessing the impact of the changes and the adequacy of their resources, systems, and processes to address the new requirements.

on the future of revenue recognition
Revenue, or the “top line,” is one of the most closely-monitored measures in financial statements. However, the accounting rules for revenue can be difficult to decipher. US revenue guidance today is a tangled web of special rules and exceptions created to address unique transactions, industries, and business models. The FASB and IASB are in the process of replacing this labyrinth of revenue guidance with a new global accounting standard that will apply a single set of principles to all revenue transactions, regardless of industry. Their proposed standard, issued in June 2010, received extensive feedback, which the boards have discussed at length during the first half of 2011. Now that they’ve completed their initial redeliberations and decided to re-expose their revenue proposal, it’s time to take stock of the effects. Understanding the impact now will inform your response to the revised proposal and limit surprises down the road. This 10Minutes provides a preview of the proposed changes and their implications. We expect the FASB and IASB to issue a revised exposure draft in August or September 2011 and a final standard in the September