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High Performance Finance

Enabling revenue oversight through process and organizational excellence for communications and technology companies


The new revenue recognition guidelines set out by FASB and IASB demand a proactive and comprehensive examination of a company’s end-to-end revenue function and a significant commitment in terms of funds and resources for a potential multi-year effort to assess and implement the required modifications to policies, processes, systems and organizational alignment.

The core principle of the new guidance is based on the expected entitlement of consideration in exchange for goods and services. In the Communications industry the impacts may include the elimination of contingent revenue cap, variable consideration in network access contracts and additional performance obligations may exist in the area of activation and installation services in particular. The degree in which companies in the Communications industry are impacted will vary based on the systems the organization currently has in place.

Regulatory compliance is a powerful incentive to commit significant financial and non-financial resources to remain in step with rules and regulations.

The Approach


With the announcement of the new converged standard on revenue recognition on May 28, 2014, the Financial Accounting Standards Board and the International Accounting Standards Board (“the Boards”) have concluded their multiyear effort to streamline and improve this key area of financial reporting.

In the process, the Boards have adopted sweeping changes to revenue accounting regulations with significant impacts to a broad spectrum of companies across many industry groups in the jurisdictions under US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

In light of the new standard, chief financial officers (CFOs) will need to re-evaluate their current revenue accounting processes, organization and systems and assess what changes are required to maintain compliance with the new guidance for annual reporting periods beginning December 15, 2016.

Key Findings

While revisions to accounting guidelines are frequent and companies are typically adept at conforming to new guidance, in our view this particular change is fundamentally different for a number of reasons:

  • The scope of the new standard on revenue recognition is significant as it seeks to encapsulate the current complex, detailed and disparate revenue guidelines into one set of guidelines standardizing revenue accounting treatment for economically similar transactions.
  • The use of bundled arrangements, complex pricing arrangements and a variety of sales channels result in revenue accounting becoming a highly complex process and affecting many company functions such as finance, information technology, human resources, sales, legal, and supply chain.
  • Many enterprise resource planning (ERP) systems currently do not support key aspects of the new guidance. Thus, CFOs may need to explore the potential use of bolt-on and custom technical applications for either a permanent solution or to bridge the gap until ERP vendors have put compliant technology in place.
  • The time between the announcement and the effective date of the guidance appears to be deceptively long. This may provide a false sense of security to companies with respect to the time they have to comply with the new guidance. The degree of change required for some companies may be significant and entail fundamental changes to process, organization and technology, so in our view a proactive approach to assessing the implications of this guidance to the business is paramount.


In addition to assessing the impacts of the new guidance on the organization’s end-to-end revenue process and the supporting technologies, we believe CFOs should also be cognizant of:

  • The likely need for additional data and analytics to support the greater requirement for estimates and judgments under the new regulations.
  • The need to have data and processes which will support and reconcile the external financial reporting view, as required by the new statutes, along with a management view which highlights the economic profit of the transactions.
  • The potential benefits of investing some effort to assess current contract governance and standardization in the company.
  • The opportunity to assess the current talent and organization and validating the need for a balanced skill-set in technical accounting, contracting, product management and data analytics to support future revenue processes. Most importantly, though, progressive CFOs will likely see the need of adapting to the change in compliance as a welcome opportunity to explore broader value generating initiatives beyond the revenue accounting process and thereby leverage the need for compliance into potential cost savings and greater effectiveness in managing the company’s business.

What's Next?