Technical Accounting

A $150 million public SaaS company needed assistance with implementing the new revenue standard.

The Challenge

  • Although the Company’s arrangements had multiple elements, the elements were accounted for as a single combined unit of accounting because they did not exhibit standalone value
  • As a SaaS Company, the Company’s historical revenue recognition fell under SAB Topic 13 and ASC 605-25
  • Up-front fees were deferred and recognized over an estimated customer life of 5 years
  • The Company had not elected to capitalize direct and incremental costs to obtain and fulfill contracts
  • The Company’s ERP accounting system had limited capability to capture additional information or perform automated allocations

The Solution

  • WilliamsMarston analyzed the company’s existing revenue recognition model and identified the anticipated impact of the new revenue standard
  • All permutations of customer arrangements were identified and the existing revenue policy was mapped to the new standard to identify additional potential impacts
  • A comprehensive new revenue recognition policy was written using recently published Big 4 guides as a comprehensive checklist for impact areas including costs to obtain and fulfill contracts
  • Coordinated with the company’s management and their external auditors to reach an agreed upon revenue model under the new standard
  • Evaluated the extra disclosures required under the new standard and evaluated the existing systems to identify necessary system changes

The Result

WilliamsMarston developed the proposed revenue recognition and cost models under the new standard, created a comprehensive new revenue recognition policy, and began developing a cross functional work-plan to implement the new standard. WilliamsMarston also assisted management with communicating the proposed approach to all stakeholders including the Board and investors.