New revenue recognition rules have Silicon Valley & Bay Area companies seeking expert advice
RoseRyan adds seminars to meet demand; 41 companies tap consulting firm’s expertise
(Newark, Calif., December 7, 2009) — Local companies are trying to get a handle on the new Financial Accounting Standards Board (FASB) rule on recognizing revenue for bundled products, and RoseRyan, a Newark-based accounting and finance consulting firm, has responded with a flurry of seminars. Forty companies to date have participated in the consulting firm’s educational events since October. RoseRyan will complete one last seminar at NET on December 10 to close out 2009.
Businesses with a calendar-based fiscal year have until January 1, 2011 to comply with the ruling, which was announced in September, but some companies are finding that early adoption will pay off in a fatter top line—despite potentially complicated implementation.
“Companies have a lot of questions and concerns about the changes to revenue recognition for bundled product offerings,” says Kathy Ryan, CEO and CFO of RoseRyan (www.3rdarm-dev.com). “Those that are on top of financial regulations and savvy about how much time it can take to implement changes like this are digging into it now and seeking expert advice. We’re out there meeting one-on-one with current and potential clients to help them consider when they should adopt.”
“We’ve held 18 seminars to provide an overview of what the recent FASB ruling means for companies that earn revenue from a sales transaction that delivers different elements at different times. It’s a key issue for many technology companies and for many baby bios as well.”
Due to demand for the events, RoseRyan added seminars to its original schedule, and the firm expects interest to continue well into the new year, given the 2011 deadline.
Local findings and observations
Public, private…makes no difference
Led by the consulting firm’s top technical accounting experts, Maureen Earley and Kelley Wall, the RoseRyan seminars have drawn equal interest from private and public companies, no doubt because the FASB ruling affects them in the same manner.
Businesses participating in RoseRyan’s “lunch & learns”—held on-site at clients’ offices—include public companies such as Blue Coat, Nvidia, Infinera, Align Technology, and Sun Power, as well as private companies such as Coupons Inc. and Fluidigm.
What companies are working on…
According to Wall, right now companies are focused on deciding when to implement and how to address significant implementation issues. She reports that public and private firms are trying to figure out how to estimate the fair value of each deliverable element and recognize it as it is delivered (a fundamental change called for by the new ruling), and are assessing how their systems can accommodate the change.
She also notes that the changes to “rev rec,” as the finance pros call it, will be difficult because they affect many areas within companies, including HR, sales, marketing, investor relations and IT. Wall is suggesting that companies form cross-disciplinary task forces to handle the changes.
The top line: a boost for some
Wall, a veteran technical accounting expert, says the most exciting aspect of the new rev rec rule is that it could add to immediate results to the top line. “For some companies, this is a big relief because under current rules many companies have had to defer a lot of revenue; under the new rule, they will be able to recognize it sooner. However, for companies that were already able to establish the fair value of their different elements in the sales arrangement, the dollar impact on the top line will be minimal. These companies are unlikely to adopt early,” she says.
Apple, for one, is expected to benefit from the rule change and was among the Silicon Valley companies publicly calling for the change. According to Erica Ogg of CNET, Apple’s iPhone revenues under the old accounting rule were recognized over two years.
RoseRyan advises companies not to wait too long
While companies that see little or no top-line benefit from the change may want to sit back and avoid being implementation “guinea pigs,” waiting too long also poses risks. A worst-case scenario for a public company, for example, could be an error causing a restatement or deferment of their 10Q filing. For private companies, it could be a delayed audit that holds up crucial liquidity events. Wall says the time to think through the issues and work on internal operations is now, not late next year.
For more information and background on the revenue recognition change, see this overview by RoseRyan.
Deploying its carefully selected dream team of seasoned consultants from offices in Silicon Valley, RoseRyan has been providing top-tier finance and accounting expertise to more than 500 companies since 1993. The friendly accounting and finance brain trust’s recent and current clients include Actelion, Netflix, NetApp, Ocarina Networks, Silver Spring Networks and CalCEF.
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