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April 24, 2019

Retailer Rewarded by Early Revenue Recognition Adoption Analysis

Client Profile

Industry: Retail
Annual Revenue: ~$500 million
Geographic Footprint: National
Ownership Structure: Private Equity Owned

Point-of-sale with woman in backgroundIssue

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.

Solution

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
company’s books.
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.

Outcome

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.

2019 Business Tax Planning Supplement


Copyright © 2019, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

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