This post was originally published 27-May-2021 on LinkedIn.
Tomorrow marks the 8th anniversary since FASB issued the ASC606 accounting standard.
Usually anniversaries are something to celebrate, but not this one. 606 creates revenue out of reimbursable costs. 606 distorts gross and operating margins and makes cross-company comparisons more difficult. 606 encourages companies to smooth earnings, book change orders prematurely, and take on excessive third party risk.
Complaining doesn’t change things, so how do you make the best of it?
- Tell clients you have significantly improved your ability to forecast reimbursable expenses on their projects.
- Improve your budgeting accuracy for reimbursables at the proposal stage.
- Pay sites on time!
- Manage your unbilled/deferred balances more systematically than before.
- Challenge your finance team to handle 606 self-service with minimal operational input.
Let me know of any others you think of. Happy Thursday!