ASC 606, Revenue From Contracts With Customers, was issued jointly by the FASB and IASB on May 28, 2014. It was originally effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016, for public entities. Early application was not permitted (however, early adoption was optional for entities reporting under IFRSs). On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred for one year the effective date of the new revenue standard for public and nonpublic entities reporting under U.S. GAAP. Therefore, for public business entities, certain not-for-profit entities, and certain employee benefit plans, the effective date for ASC 606 is annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017.
The effective dates of the new ASC606 and IFRS15 accounting standards are looming, in turn renewing the emphasis on revenue recognition and finance management. Financial metrics must be forward-looking and report on:
- customers, not units;
- lifetime value, not average selling price;
- recurring profit margins, not annual gross revenue;
- renewal rates, not close rates;
These metrics differ but do not always map to those configured in an enterprise general ledger (GL) system. CFO's may require access to detailed key performance indicators and reports directly from the billing solution itself — relying on it as a "second tier" to incumbent ERP and GL systems. As a result, the Billing System becomes an extension, subledger, of the General Ledger and necessitates the need for finance and billing to be tightly coupled.