In a September 21 speech, SEC Deputy Chief Accountant Sagar Teotia shared several observations regarding implementation of the new GAAP standards in the areas of revenue recognition, leases and credit losses. The Ticker has previously reported on the need for companies to prepare for timely implementation of the new revenue recognition standard, and on auditors’ focus on related disclosures.
In his speech, Mr. Teotia builds on these topics and encourages companies to “finish strong” with revenue implementation, which will be required as of January 1, 2018, for most public companies. Mr. Teotia also encourages companies that are still in the earlier stages of their implementation efforts to “significantly ramp up” their efforts. Accounting professionals expect a “mad dash” as the deadline approaches, with smaller companies in particular needing to “break into a sprint,” according to a recent article in Compliance Week.
While the new standards on leases and credit losses will not be required until 2019 and 2020, respectively, Mr. Teotia encourages companies to “not just think about the implementation efforts of the new GAAP standards sequentially based on the effective date of each standard” and suggests that implementing the new standards on leases and credit losses concurrently or partially concurrently with the new standard on revenue recognition will likely be easier and more efficient.
Mr. Teotia also stresses the key role of audit committees in setting the right “tone at the top” by “actively monitoring the implementation efforts, including taking the time to understand, and assess the quality and status of implementation.”