CPABC Industry Update Summer 2016 | Page 14

Preparing for the new... (cont’d) Non-revenue contracts and arrangements Many companies haven’t considered the potential effect on their nonrevenue arrangements. It’s important to understand the impact on other contracts. For example, if you have employee compensation arrangements based on revenue metrics, then IFRS 15 could result in a change in the amounts you pay your employees, unless you’re able to amend the agreements to offset the impact – and that will need careful analysis and communication with employees. Costs A very high proportion of survey respondents report that they don’t know or aren’t sure of the costs to implement. For any accounting change project, a key step is managing stakeholders and getting internal support for the project – and for this, you’ll need some idea of the likely scale and related costs of the project. Our survey found that 71% don’t know or are still assessing the cost of external help required to implement the revenue standard. And 62% don’t know or are still analyzing the internal costs of implementing the new revenue standard. Step 2: Get set Work on specifics. Study revenue streams and contracts to identify specific issues you’ll face and work through the issues. The actual impact will go well beyond the accounting department and will touch other departments across the company, including sales, business unit managers, legal, and HR. Once you page 14 | conduct an initial assessment, you can identify which areas are affected and the extent of change, and then you can engage those teams to comply in time. This is a time-consuming exercise. It will involve detailed technical analysis of the new requirements as well as change management throughout the organization. Arm yourself with the details you’ll need to create a rollout plan, so that you won’t be scrambling at the last minute. When asked which areas of the standard will be most challenging to implement, respondents identified the following areas: dentifying performance • Iobligations – 39% appropriate timing of • Drevenue  etermining recognition – 52% ng systems and • Iprocesses m p l e m e ntot ianalyze and collect data for disclosure – 36% Over 60% of respondents identified the impact on the timing of revenues as having both the greatest effect on reported revenue as well as requiring the most effort to implement and operationalize. Implementation timeline Once you’ve assessed the impact and worked though specific issues, you’ll be ready to implement. With a deadline of January 1, 2018, to be fully compliant (earlier if you use the retrospective method), you need to work through the first two steps to get to implementation on time. Our survey found that only 3% of Canadian companies are currently embedding systems and process changes, 15% are faced with the challenge of having contracts in different languages, and 54% have contracts that are dispersed across the organization and around I N D U S T R Y U P D AT E the globe. Nearly half (46%) of those sur veyed expect a moderate to significant effort to apply the new standard at the contract level. Step 3: Go Implement systems and processes to record revenue transactions under the new guidance accurately and on time. Implementing the new standard will be complex and will require substantial time and effort. There’s no one-size-fitsall approach to this, and you’ll need to work through your company’s specific set of challenges and issues with the right partners. Implementation will become smoother once you’ve assessed the impact and worked through the details. Then you won’t be scrambling last minute, short of resources and time to implement. In fact, you’ll have a clear plan and set of actions and will get to the finish line fully compliant. Survey note: In August and September 2015, PwC Canada surveyed companies across industries about their readiness for IFRS 15 for the purposes of this report. Robert Marsh, CPA, CA is a partner in PwC Canada’s Assurance Practice in Vancouver. He specializes in issues involving financial instruments, including derivatives and hedging transactions, and advises on both Canadian and US GAAP. Robert is presenting IFRS 9 Financial Instruments Simplified: What the Majority of Small to Midsized Organizations Need to Know on September 20, 2016, at CPA Canada’s The ONE conference in Vancouver.