Accounting Zuora

Struggling with ASC 606? Here Are Some Lessons from the Leaders

Sponsored by Zuora

With everything you’ve got to do, you shouldn’t have to figure out ASC 606 on your own. Here are the best things we have learned from dozens of successful implementations.


For accounting professionals, numbers tell the story. Here’s an ASC 606 story: 80%, 57%, and 3%. 

During a recent webinar by Zuora and Connor Group, we conducted a poll on where companies were on their ASC 606 journey. More than 80% said they were a third of the way or less in documenting their company’s ASC 606 policy, 57% hadn’t even started documenting, and only 3% had completed the adoption of the new guidance.

Let the gravity of those numbers sink in. 

It’s painfully clear that most companies are in a state of non-readiness and even after the public company effective date has passed, ASC 606 remains a big challenge for businesses. And since this is the first time for everybody – businesses, auditors, and regulators – many common (and often avoidable) mistakes tend to get repeated. Fortunately for all of us, some of the companies who’ve made it through the adoption process are willing to share their learnings. But first, let’s take a step back and understand the issue.

ASC 606, “Revenue from Contracts with Customers,” issued by the Financial Accounting Standards Board (FASB) in conjunction with IFRS 15 from the International Accounting Standards Board (IASB), replaces all the industry-specific guidance with a single, converged model built around a solidifying principle: Companies must recognize revenue when goods or services are transferred to the customer. While public companies were required to adopt these changes for all annual reporting for periods that began on December 16, 2017 or later, private companies have an additional year.

The adoption process can be quite complicated and time-consuming. Many companies that started their adoption process two years ago and thought they were getting an “early start” found themselves coming in just under the wire at the time of completion. Given how complicated the new guidance is, it will help companies to learn from those ahead of them in the adoption process. 

Here are some key learnings from companies that have worked with Zuora to adopt the new guidelines:

Aligned Governance: The ASC 606 guidance requires a different mindset for accounting. The impact to your organization will be felt company-wide, not just within the walls of the finance department. It will be critical to properly assess the cross-departmental impacts. Executive sponsors and alignment across all levels within the organization are critical to success. It will also help deal with issues such as variable consideration and contract modifications, in particular, will require a thorough understanding in order to make the right decisions when the time comes.

Understanding Data: Having a solid understanding of your upstream systems - those from which data flows into your ERP - cannot be stressed highly enough. Nobody understands your company’s data like the teams within your organization who work with it day in and day out. So, be sure to involve these resources to help external parties decipher this data and apply it to your revenue management solution of choice. 

There will also be data conversion required, regardless of whether the method of adoption is full retrospective or modified retrospective. Until such time as data, both historical and newly created can be pushed through the revenue system, there will be little to no visibility into the potential internal system gaps. Once that data can be processed, you will have the clarity you need to see which integrations work and what changes are necessary. 

Role of Auditors: From an auditing perspective, the implementation of ASC 606 is of a magnitude unlike anything an organization will be expected to go through. Yes, really. This is a change which could impact everything from established policies and procedures to SOC and audit controls. For all those reasons and more, early involvement of your company’s auditors is a critical component of successful implementations.

At no time is it more important to loop in auditors than during the data validation process. If you’re able to tie back validations to financials under ASC 605, data already understood and validated by the auditors, any delta between 605 and 606 financial figures comes with proven confidence. With that in place, testing may focus on what is new and different.

Disclosure Reporting: One of the biggest areas of impact with the new guidance is in the level of disclosure reporting. The recommendation by those who have seen the process through to the end was, by far, to pursue a more detailed level of disclosure reporting, which can always be pared down, if necessary.

When it comes to subscription businesses, in particular, such disclosures become even more crucial for investors. More detailed disclosure reporting instills confidence in a company’s performance whereas a simplified version could lead to perceived unreliability. While there’s not one perfect metric, transaction price disclosure is the closest thing to a real-time view of how a business is performing. Consider the element of exterior perception, when considering your disclosure reporting.

Each implementation of this new, principles-based guidance will undoubtedly be specific to individual company needs and requirements. However, there is no need to reinvent the wheel every time. The lessons above will help increase the success rate of this generational shift to your company’s finances.

For more on how to get to the ASC 606 finish line, check out our free ebook – Key Lessons from Successful ASC 606 Implementations