ÇóÎÄÏס°Revenue Recognition for Retailers: An Accounting Standard Overhaul that

Revenue Recognition for Retailers: An Accounting Standard Overhaul that Could Impact Profits by Millions
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ÕªÒªFASB and IASB recently decided current revenue recognition practices were in dire need of an update and released a converged standard on revenue recognition under ASU 606 and IFRS 15. The new standard hopes to improve financial reporting by removing inconsistencies, improve comparability and overall provide more useful information to financial statement users. This paper examines how the new revenue recognition standard will impact the retail industry. This is said to be the biggest accounting standard change since Sarbanes-Oxley Act in 2002 and companies across the globe are gearing up to adjust current accounting practices to be in compliance with the new requirements. Though the accounting world is aware of the potential impacts of this new standard, is it is difficult to quantify exactly how much revenues will differ due to this change. Retailers that rely on gift card breakage as a large revenue stream will see the most material effects on their financial statements. Revised standards regarding revenue from loyalty programs and returns will also change how revenue is recognized but will have less of an impact than revenue from gift cards. Retailers can also expect their accountants to spend an abundant amount of time altering their accounting systems and restating historical data using the new method to calculate new revenue figures.¸ü¶à