Revenue recognition – changes in construction accounting standards
by Ruth Stockdale, LAI Director of PSG
Data setup and report modification
For some of you, 2019 is the year for implementing required changes in methods of reporting revenue. As always, talk to an accounting professional for clarification on how this may apply to some, or all, of your jobs. But, if you are subject to the changes, your data setup and reports may need modification.
Recommended areas to check:
The rules refer to “performance obligations”. I recently saw a presentation where “PO” was used as an abbreviation for performance obligation. Some of us think of PO as a purchase order. When discussing procedure or data changes, be sure everyone is clear about terms.
Cost and Revenue Breakdowns
You may need additional records to split up a job, or a way to group multiple jobs together. Adapting your use of Contract, Project, Job, Phase, Cost Codes, or custom fields can help.
Formal Change Orders may need to be set up in your software instead of just informally adding costs and billings to a job. Your job setup and closeout process may change. You may need to handle rework and maintenance differently.
You may need to make an adjustment to prior year entries.
Report Design Edits
You will need to accommodate any changes or additions in account numbers or other codes. If you use year-to-year comparisons, you may need to accommodate the slight mismatch between old-to-new methods of reporting.