22 Mar A Change Management Approach to the Adoption of ASC 606
Adoption of the new accounting standard ASC 606 will change how companies record their revenue. But, it will also affect functions across the business – from IT and Finance, to HR and Leadership. In fact, its impact will likely be felt by companies of all sizes and in all industries, as they will be required to document new data requirements, apply significant management judgment, and support additional disclosures and estimates.
Although the full extent of the change will be unique for each company, the new requirement will have downstream impacts on people, processes, and systems—and those changes have the potential to be pervasive.
Execution of a major transition in any organization is difficult, particularly when the change requires new ways of working. Faced with the daunting task of implementing the new standard, you may feel uncertain as your company tries to address questions around the amount of time and resources such an undertaking may require.
At Navigate, effective change management remains consistently top of mind as we partner with our clients to address ambiguity around organizational changes such as those mandated by the new standard. Below are several activities we recommend when considering how to adopt standard ASC 606.
Assess the Impact of the New Standard
Conducting an upfront inventory and assessment of existing contracts will enable you to prioritize contract types that may require more significant analysis, such as those with unique terms. This assessment is also helpful in developing a more focused timeline and sequence of events for implementation.
Minimize Ambiguity Associated with the Change
One of the most unsettling aspects of transformation is uncertainty around the future. To mitigate this uncertainty, we recommend that you identify direct and indirect changes that may occur or impacts that may be felt, as well as areas of potential risk. This will eliminate some of the unknowns and focus your efforts on high priority impacts like capturing accurate and timely data for reporting and disclosures.
Define and Document Approach
Companies who take the change on as an initiative and develop a coordinated plan upfront will fare better when further information is uncovered and risks arise. We suggest that you:
- Identify the downstream impacts to processes, data, reporting, technology, policies, etc.’
- Define a new standard review and documentation process
- Proactively identify and manage potential risks
- Coordinate efforts across multiple stakeholders and departments
- Document and socialize communication & training plans
A customized, well-defined approach will enable you to achieve ASC 606 compliance with minimized disruption to the business, accelerated adoption, and greater overall readiness to adapt to the new standard. If you have questions about ASC 606 and how your company can prepare, please feel free to contact me at email@example.com.