ASC 606, Revenue From Contracts. It. Changes. Everything.
ASC 606 (new Revenue Recognition rules) is one of the largest changes to GAAP in nearly 20 years and is far more principles-based than existing accounting guidelines. It determines when and how an entity recognizes revenue from its customer contracts.
What Does ASC 606 Mean for Lenders?
As a financial institution, you’ll need to understand how the new standards can potentially impact your existing loan portfolios and your future lending decisions. That includes:
• Evaluating how the new rules will affect your underwriting processes.
• Considering whether the rules will affect covenant compliance for existing borrowers.
• Redefining terms and conditions in your standard lending agreements to comply with the new revenue guidelines.
Your Borrowers Should Be Starting Their Transition
ASC 606 will take months to implement at most companies. It becomes effective for public companies in 2018 and for private companies one year later. So you’ll want to find out:
• Whether your borrowers understand the standard.
• How they will transition to the new rules. What is their plan?
• How the new rules will affect your borrowers’ financial statements and compliance with debt covenants.
Wipfli Can Help You and Your Borrowers
Transitioning to ASC 606 can be challenging. Wipfli’s Revenue Recognition team can help reduce the learning curve and get you and your borrowers transitioned faster. We provide integrated services in accounting, advisory, technology, and risk and compliance.
Let's collaborate and see how we can help.