Retailer Rewarded by Early Revenue Recognition Adoption Analysis
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A retailer undergoing an enterprise resource planning (ERP) system upgrade needed to know
the impact of adopting the new revenue recognition standard. The accounting standard
update affects nearly every contract with a customer, and the retailer wanted to understand
the potential system changes that would be involved.
Our team discovered that applying the new revenue recognition standard resulted in a change
in the retailer’s revenue recognition patterns from point-in-time recognition to over-time
recognition. The switch to over-time recognition resulted in an acceleration of revenue on the
Over-time recognition also presented a challenge because the company did not have
the systems in place to track its progress toward satisfying the contract’s performance
obligation(s) in an over-time model. We worked with the company to devise a practical
solution that supported compliance with the over-time revenue recognition model without
incurring significant IT redesign costs.
By evaluating the impact of the revenue recognition standard before its adoption date,
the retailer had time to implement internal changes to ensure compliance with its new
requirements. The retailer also had ample time to create an acceptable, cost-effective
methodology for its new revenue recognition patterns.
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