Preparing for the new... (cont’d)
Non-revenue contracts and
arrangements
Many companies haven’t considered
the potential effect on their nonrevenue arrangements. It’s important
to understand the impact on other
contracts. For example, if you have
employee compensation arrangements
based on revenue metrics, then IFRS 15
could result in a change in the amounts
you pay your employees, unless you’re
able to amend the agreements to offset
the impact – and that will need careful
analysis and communication with
employees.
Costs
A very high proportion of survey
respondents report that they don’t
know or aren’t sure of the costs to
implement. For any accounting
change project, a key step is managing
stakeholders and getting internal
support for the project – and for this,
you’ll need some idea of the likely scale
and related costs of the project.
Our survey found that 71% don’t
know or are still assessing the cost of
external help required to implement
the revenue standard. And 62% don’t
know or are still analyzing the internal
costs of implementing the new
revenue standard.
Step 2: Get set
Work on specifics. Study revenue
streams and contracts to identify
specific issues you’ll face and work
through the issues.
The actual impact will go well beyond
the accounting department and will
touch other departments across the
company, including sales, business
unit managers, legal, and HR. Once you
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conduct an initial assessment, you can
identify which areas are affected and
the extent of change, and then you can
engage those teams to comply in time.
This is a time-consuming exercise. It
will involve detailed technical analysis
of the new requirements as well as
change management throughout the
organization. Arm yourself with the
details you’ll need to create a rollout
plan, so that you won’t be scrambling
at the last minute.
When asked which areas of the
standard will be most challenging to
implement, respondents identified the
following areas:
dentifying performance
• Iobligations
– 39%
appropriate timing of
• Drevenue
etermining
recognition – 52%
ng systems and
• Iprocesses
m p l e m e ntot ianalyze
and collect
data for disclosure – 36%
Over 60% of respondents identified
the impact on the timing of revenues
as having both the greatest effect on
reported revenue as well as requiring
the most effort to implement and
operationalize.
Implementation timeline
Once you’ve assessed the impact
and worked though specific issues,
you’ll be ready to implement. With
a deadline of January 1, 2018, to be
fully compliant (earlier if you use the
retrospective method), you need to
work through the first two steps to
get to implementation on time. Our
survey found that only 3% of Canadian
companies are currently embedding
systems and process changes, 15%
are faced with the challenge of having
contracts in different languages, and
54% have contracts that are dispersed
across the organization and around
I N D U S T R Y U P D AT E
the globe. Nearly half (46%) of those
sur veyed expect a moderate to
significant effort to apply the new
standard at the contract level.
Step 3: Go
Implement systems and processes
to record revenue transactions
under the new guidance accurately
and on time.
Implementing the new standard will
be complex and will require substantial
time and effort. There’s no one-size-fitsall approach to this, and you’ll need to
work through your company’s specific
set of challenges and issues with
the right partners. Implementation
will become smoother once you’ve
assessed the impact and worked
through the details. Then you won’t
be scrambling last minute, short of
resources and time to implement. In
fact, you’ll have a clear plan and set of
actions and will get to the finish line
fully compliant.
Survey note: In August and
September 2015, PwC Canada
surveyed companies across
industries about their readiness
for IFRS 15 for the purposes of
this report.
Robert Marsh, CPA, CA is
a partner in PwC Canada’s
Assurance Practice in Vancouver.
He specializes in issues involving
financial instruments, including
derivatives and hedging
transactions, and advises on both
Canadian and
US GAAP.
Robert is presenting IFRS 9
Financial Instruments Simplified:
What the Majority of Small to Midsized Organizations Need to Know
on September 20, 2016, at CPA
Canada’s The ONE conference in
Vancouver.