Updated Revenue Recognition Standard
The newly updated revenue recognition standard is a system of accounting which affects not just the finance institutes bit all companies producing and offering series of services.
In every business, there is a way through which revenue is generated and how it affects finances. The new accounting standards will cause a lot of change in how things are done. This has the tendency of affecting things such as strategy, information technology, human resources, sales and marketing and taxation. Looking at the situation, this will have a really big toll on small businesses because it will cause a tremendous change in lots of capitals and other things and this may lead to a fall in stock.
The new revenue recognition standard which serves as a converged standard for accounting was first put in place in December 2015 and this only affected the public sectors in the United States. Now, the changes now applies to all business entities, both large and small, that make use of the United States generally accepted accounting principles as its accounting standards. Due to this changes, there will certainly be a change in the way things are done and this will surely involve a change in the way we think after the way we work. Businesses might need to acquire the technicalities of new labours and in the long-run this may cause a reduction in the number of employed people.
Although, this is a new and a more standardized initiatives, there is need to thing about the possible effects this changes will have on businesses both positive and negative.
Some of the possible influences this will have on businesses includes :
- An Opportunity to create new things: the updated standards may seem too capital intensive but it is worth it. This standard will make small companies think more and device more substantial ways to serve their customers with the new development.
- Technology and Timing involved: as well known that the world has gone past the age of stone, it is important to know that there will be an increase in the amount of things artificial intelligence will help to handle which will help to eradicate the use of the brain for lots of workload. It is observable essence to know that they Software’s for computer systems used from time to time might need to be updated, if not up to date so s to meet the needs of the updated guidelines.
The updated revenue recognition standard has inculcated a method through which oral messages can be used as a form of contract rather than using the sophisticated contract method. This new standard now make use of guidelines rather than the use of rules.
For small businesses, this may be quite trivial but over time it will become easier and they will be able to learn and grow through it.
There are some things that are now inculcated in the updated standards and they are: identifying the contract with the customer, identifying what both parties are meant to do according to the contract, determine the price of transaction, allocate the transaction price based on what you are ought to do and finally, you recognize the revenue when the entity satisfies a performance obligation.