Public, diversified technology company seeks assistance with new revenue recognition guidance
Company: Public technology company
Challenge: Impact of new revenue recognition guidance
Solution: New accounting policies
A public technology company had grown rapidly and expanded its service offerings through multiple acquisitions. As a result, the company now has a complicated revenue structure, with complex customer contracts incorporating many revenue elements. Management took a proactive approach to identify the impact of new revenue recognition guidance on financial reporting and operations, understanding that changes to accounting policies and IT systems would be required. They needed an unbiased view of the impact of the guidance and assistance to support them in this analysis.
WHAT THE TEAM DID
Grant Thornton LLP was engaged to advise management on the revenue recognition implementation project. To kick off the project, we conducted a three-day workshop for key members of the client’s account team and our core team. We discussed the company’s structure and revenue streams, allowing this discovery process to help us define the deliverables for the project. The scope evolved as we gained a greater understanding of the company and through regular meetings with management to make sure our team continued to move in the right direction. To onboard members of our service team, we conducted a three-hour training session covering the company, its business and structure, and a review of their contract types and revenue streams.
We began fieldwork with a month-long deployment at one of the client’s segment headquarters. A key to this process was working with company accounting staff at the location, which included jointly reviewing contracts and identifying needed technical research. Based on our review and research findings, we began drafting accounting policies for revenue streams relevant to the business units at that location.
After completing our work at the first location, we replicated the process at other major segment headquarter locations with a focus on different revenue streams. Overall, we addressed the impact of the new guidance on over 60 different business units.
By the conclusion of the project, Grant Thornton had worked with the client to co-develop 21 new accounting policies. This involved extensive research and consultations with our National Professional Standards Group, who also leveraged knowledge gained through participation in implementation groups, including the AICPA Revenue Recognition Working Group. Our national specialists were readily available for consultations and reviewed the deliverables. We helped the client to identify and understand practical applications of the new policies and consider what system changes would be needed to support the accounting changes.
Based on our work with them, the client now has the information necessary to articulate the day-one impact of the new revenue recognition guidance. They will be able to plan and budget for the system changes required to implement the guidance. The client will also be prepared to run parallel systems ahead of the effective date and lay the foundation for an effective Sarbanes-Oxley Act Section 404 review by independent auditors. We were able to achieve the results they desired seamlessly and collaboratively, with constant dialogue between our engagement team and management.