Baker Tilly’s client, an enterprise software company, provides project-based software in the government contracting and services industries. In 2016, the company entered into an agreement to sell to a public technology company. As a result, our client is now required to adopt ASC 606 earlier than expected. Our client contacted Baker Tilly to assist with initial assessment and discovery of the impact of implementing the new revenue recognition guidance.
The new revenue recognition standard has forced many organizations to evaluate their contracts with customers and the systems, processes, controls and documentation they have in place. For some, the accounting changes may make changes to the contracts themselves more viable, while others may find that the initial work for disclosures comprises the bulk of their change. Whatever your organization’s situation, companies should review the standard and its impacts.
Once engaged, Baker Tilly spearheaded Phase 1 of the revenue recognition project lifecycle, which included the assessment and impact analysis on the financial reporting of the company’s revenues. As part of this effort, Baker Tilly evaluated each significant revenue stream to identify potential impact areas. Baker Tilly reviewed an inventory of contracts for these revenue streams to validate the significance and risk of these impact areas. From this analysis, Baker Tilly developed a gap analysis that identified the areas of risk for the company’s processes, internal controls, information and business systems and financial reporting.
Baker Tilly’s team successfully completed Phase 1 of the revenue recognition assessment for our client. Currently, we are assisting with Phase 2 which includes strategy determination and implementation. We are present and active on the company’s Phase 2 steering committee and will provide insight and assistance as needed through implementation.
The Baker Tilly difference: Baker Tilly’s technical accounting experience, industry knowledge and implementation experience with the new standard allowed us to structure our observations and solutions in Phase 1 specific to the unique challenges applicable to our client’s industry.
For more information on this topic, or to learn how Baker Tilly industry specialists can help, contact our team.