Daylight savings is this weekend and don’t worry, this article is not some cheap word play on the word ‘savings.’
Do we save money and time for our clients?
Of course, that is why you get ProRata.
Is that what this article is about?
No. We respect our readers.
Time to understand this whole 2018 GAAP Compliance. Its scaring the daylights out of people. We’re getting calls.
Let’s fall back on the literature and shed some light on why automating revenue recognition or at the very least getting a CPA to make sure you are absolutely compliant.
The GAAP rules for 2018 have shifted and here are the area you need to look up if it is relevant to your business:
-As of December 15, 2018, everyone is to be following FASB regulated guidelines (not
just public companies)
-SaaS companies will likely be required to make an estimate of “variable consideration”
including any contingent usage fees or royalties (if you have contingent fees above and
beyond the usual SaaS business, make sure to go to the FASB website)
-Keep an eye out for distinct performance obligations as accounting units within a
customer contract have changed for specific types of obligations (if you have obligations
above and beyond the usual SaaS business, make sure to go to the FASB website)
-Anything not covered by the standards previously that one would normally be at the
company’s disgression must now be reported to standard
The last three points specifically affects SaaS companies, otherwise it is business as usual. Overall a push for internal controls (automation acts as an internal control, especially of needlessly error-prone processes such as revenue recognition spreadsheets) has been a hallmark of rhetoric surrounding the new guidelines. Additionally, keeping good data that is uniform for investors and auditors is emphasized in compliment to encouraging businesses to have an internal control for obvious reasons such as keeping your business from going under and keeping you out of jail.
Hope this helps! Please comment with questions below or @ProRata on Twitter. Enjoy falling back November 6th!