Revenue Recognition Accounting Standard and the Impact to Commission Expenses: Get Prepared

With the Financial Accounting Standards Board’s (FASB’s) newly released Accounting Standards Update (ASC 606), changes are coming that impact your commission expense accounting process. Xactly can help you create an actionable plan for managing these changes and automate the tracking and monitoring of commissions data needed for GAAP-compliance.

We’ve also pulled together resources to keep you informed, and help you prepare for the effect of the new requirements.

Countdown to FASB Update: 

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Webinars

First Session

Preparing for

The New Revenue

Recognition

Standard

Second Session

Evaluating your Plans:

What to look for to

meet the new

Accounting Standards

Third Session

Meeting the

Revenue

Recognition

Requirements

using Incent

Blog Posts
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ASC 606 & IFRS 15: Revenue from Contracts with Customers

Managing sales commissions under the new Revenue Recognition Standard

4 Things to Know About the Revenue Recognition Requirement Changes

How the new requirements for accounting will impact how companies manage commissions in the future.

7 Steps to Easily Approach Data Challenges Given the New Accounting Standards

In our previous webinar, about 82 percent of viewers indicated they anticipated having to change their data. Here are our 7 steps to approaching the challenge.

MEETING DATA NEEDS >>

Configuring Xactly Incent for Commission Expense Accounting

A recap of our thorough walk-through on how to configure Xactly Incent:tm: for Commission Expense Accounting.

HOW TO CONFIGURE >>

Revenue Recognition: What Lies Ahead for Sales Commissions

With the Revenue Recognition Standard, we’re facing one of the biggest changes in accounting standards in U.S. history.

REV REC & COMMISSIONS >>

Sales Commissions “Before and After” Revenue Recognition

The “before and after” requirements for commission processes under the new Revenue Recognition standard are vastly different.

COMMISSION CHANGES >>

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Estimating Commission Amortization with ASC 606

With the deadline looming, preparation for the new Revenue Recognition Standard has taken on greater urgency.

HOW TO ESTIMATE >>

4 Ways CFOs Can Prepare for Commission Accounting Changes with ASC 606

Keeping up with regulatory changes is always a top priority for the office of the CFO. These issues have taken on even greater importance this year…

4 WAYS TO PREPARE >>

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Accounting for Sales Commissions

With new revenue recognition rules, companies need to get their data and systems in order in 2017 to be ready for 2018.

READ MORE >>

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Managing Your ASC 606 Implementation

Questions and answers regarding Commission Expense Accounting under ASC 606.

MANAGE ASC 606 >>

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Preparing Your Finance Team for the New Revenue Recognition Standard

Accounting departments face a big change with the new Revenue Recognition Standard.

PREPARING FINANCE >>

ASC 606 Guide: Checklist for Managing Commissions

The new Revenue Recognition Standard goes into effect at the end of this year for public companies and the end of next year for private companies.

GET THE GUIDE NOW >>

FAQs
Why are Revenue Recognition Standards Changing?
The standards are changing due to significant differences between U.S. and international accounting, standards and processes. In the U.S., the Generally Accepted Accounting Principles, or GAAP, supported by the Financial Accounting Standards Board (FASB) do not provide an accurate comparison with the standards of the International Accounting Standards Board (IASB). Therefore, a revision of GAAP has become necessary to support IASB and FASB convergence and create compliance with the international system.
How are Revenue Recognition Standards Changing?
Unlike the IASB, whose standards are principle-based, U.S. accounting standards are rule-based, highly scripted and extremely complex. The international standards provide for much more interpretation. The FASB is replacing GAAP’s existing rule-based methodology with a single revenue recognition principle.
What is the Impact on Accounting for Sales Commissions?
Within the new revenue recognition principle guidance is a small section called the “incremental cost of obtaining a contract” which changes how some organizations manage their accounting for sales commissions. While sales commissions represent the biggest and most obvious expense, these revenue acquisition costs can also include legal or contract arrangement fees and bonuses – basically, any expense that’s only incurred by a company when they close a sale.
Who is Impacted by the Changes in CEA?
These CEA changes impact any company paying commissions (or other costs incremental to obtaining contracts) that is reporting under U.S. GAAP. Public companies are required to be GAAP-compliant by the FTC. However, many private U.S. businesses also need to produce GAAP-compliant accounting data, including companies preparing for an IPO or companies that need to provide financials to banks or investors. In all of these cases, companies will need to produce a GAAP-compliant record. Basically, any company that is trying to stay with the GAAP standards is affected. About 80 percent of Xactly’s customers, for example, expect they will require a certain level of change.
What Happens to Businesses That Don’t Comply?
If companies are paying commissions and don’t comply, they’ll need to include a non-GAAP disclosure on their financial statements saying that they’re not following the GAAP treatment; In weighing the investment and effort, smaller companies that don’t plan to go public may just go non-GAAP in this area. They can record in their financial statement disclosures the reasons they have chosen to depart from GAAP. However, for most companies, doing so can be a red flag for banks, investors and the market.

 

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