Physician Practices: The Future is Changing
John DeLorenzo, MBA, CFO Consulting Partners LLC
Experience, focus and integrity. CFO Consulting Partners improves shareholder value.
John DeLorenzo, MBA, CFO Consulting Partners LLC
Oliver Brooks, CPA, CFO Consulting Partners LLC
INTRODUCTION
On May 14, 2014 the FASB issued the standard ASC 606 Recognition of Revenue from Contracts with Customers. The FASB issued an Accounting Standards update to the Standard (ASU 2016 -10) in April 2016.
The implementation date for the standard is:
ASC 606 will have a major impact on the reporting of revenue for all entities, public and private that enter into contracts that promise the exchange of goods and services to their customers with a relatively minor impact on some costs associated with fulfillment of the contracts.
The standard is both complex and far reaching. Consequently, implementation is likely to require considerable effort and expertise.
Entities that plan to report GAAP financials would be well advised to consider moving quickly to initiate a thoughtful plan of action to comply with the standard.
OVERVIEW OF THE STANDARD
The following recaps the author’s view of the key guidance in the standard.
Performance obligations
The basic economic transaction is the contract between an entity and its customers. The standard address the accounting for the promises embodied in the contract, which it refers to as performance obligations.
The core principle of the standard is that an entity recognizes revenue when goods and services are delivered or fulfilled.
To achieve the core principle the standard promulgates a series of actions that an entity must undertake are:
Disclosures
ASC 606 requires considerably more disclosures about revenue. In general, the intent of the disclosures is to enable the reader to understand the nature and amount of the revenue being recognized and the uncertainty of the related cash flows. More specifically the entity shall disclose:
Other
The standard provides guidance on several other situations that can arise in the administration of contracts. For example (Not a complete recap)
IMPLEMENTATION
Given the complexity of this standard and its impact on revenue, it is incumbent on entities to have a well thought out implementation and transition plan. Some key issues that the plan should address include:
Companies are advised to begin the process early to ensure compliance. For complex revenue recognition issues, the company may want to consider outside professional resources to assist in the analysis.
More detailed information may be viewed here.
Scott Magill has joined CFO Consulting Partners as a Director and Head of the Firm’s Finance Transformation practice. Scott has over 25 years of experience in financial services, advertising and accounting. He as a strong background in financial management, reporting, planning & analysis, process improvement, data management and system selection/implementation. As a former CFO, Scott applies that experience to our engagements, ensuring that Finance function of our clients is not only efficient and effective but also acts as a key business partner to the CEO and Board.
Scott spent most of his career at Citibank, managing the Planning and Analysis group for Citi’s International Consumer business, as a CFO for Citi’s consumer businesses in Hong Kong and South Asia and as systems lead for Citi’s global Finance Transformation efforts. Scott lead the implementation of Citi’s Global Financial and Management reporting system, projects that covered 85 countries and had more than one thousand staff involved. Prior to Citi, Scott worked at J Walter Thompson, at the time the world’s largest advertising agency. Among his achievements at JWT was the development and implementation of advertising specific ERP system to support JTW’s international offices.
Scott has an MBA from the University of Chicago and a BA from Lafayette College.
PR Newswire also featured this article: http://www.prnewswire.com/news-releases/scott-magill-joins-cfo-consulting-partners-as-head-of-finance-transformation-practice-300434479.html
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