ASU 2014-09: Revenue Recognition (“ASC 606”) and ASU 2016-02: Leases are two of the most significant standards that have been issued in the last 10 years. Getting ready for and implementing these standards will require much time and energy.
The revenue recognition standard may not affect the bottom line of some health care entities, but that doesn’t mean that ASC 606 can be ignored. While presentation changes resulting from ASC 606 are not complex, entities will need to document how they have considered the significance of the standard on their revenue streams and how they have implemented the standard. ASC 606 is a principles-based standard that requires significant judgment. Adoption of the standard will require organizations to quantify the impact on the prior year financial statements regardless of which adoption method is selected.
The way entities record leases will change due to ASU 2016-02. All long-term leases will be capitalized and placed on the balance sheets. Management and board members need to understand the impact this standard will have on the balance sheet, statement of operations, footnote disclosures and debt covenants.
Listen to this webinar to help understand the standards and developing plans to successfully implement these standards.