Revenue Recognition: Top Five Issues Affecting Printers
The new revenue recognition standard has tremendous implications for nearly all organizations, but printers have five particular issues to pay close attention to when implementing and applying it.
- Design and print type arrangements — Identifying performance obligations and allocating the purchase price can introduce complexities that may accelerate or defer the timing of revenue recognition.
- Point in time vs. over time — The new standard can change the timing of revenue recognition depending on contract terms and when control of the product or service is deemed to be transferred to the customer.
- Variable consideration — If you have retrospectively applied volume discounts, made payments or issued credits to customers, or have any customers that provide materials for use in the production process, the contract price allocated to performance obligations may be affected.
- Principal vs. agent — If you subcontract print work, the new standard could affect reporting revenue on these contracts on a net-versus-gross basis.
- Commissions and other costs to obtain the contract — These costs are capitalized under the new standard unless the commission-related performance obligation is satisfied within a year, and a practical expedient is applied.
What you should be doing now
There’s a good chance your revenue recognition policies and systems are affected by the new standard, even if you initially thought they weren’t. Most print shop owners and finance directors have found that, once they really dig into the guidance documents, they have some challenges on their hands, especially related to the five issues above.
If you haven’t yet developed a plan to comply, now is the time. Make sure you really comprehend the standard. Review contracts in your revenue streams, document revenue recognition issues, and record your conclusions.
How we can help
CLA’s printer-specialized professionals can assist you with all your revenue recognition efforts, from smaller in-house projects to full-service revenue assessments and implementation. We have published numerous materials and recorded an industry-specific webinar for your reference.