Proformative: How the New Revenue Recognition Guidelines Impact Budgeting and Planning
New rules governing revenue recognition for contracts will go into effect for most companies in 2018. Companies that use even moderately complex contracts in their dealings with customers will find that in addition to changes in an organization’s contracting and accounting, also will need to examine their planning and budgeting processes. For some, the time lag between when a contract is signed and when a company recognizes revenue from it may be more variable and less predictable than in the past, meaning that performance measured by financial accounting will diverge materially from the “real” economic performance of the organization. Consequently, executives will need the ability to look at their plans from both perspectives and be able to distinguish between the two in assessing their company’s performance.