Oops! Something went wrong while submitting the form.
Get a Demo
See your data in HubiFi < 2 days
Master ASC 606 and SOX controls for financial reporting with this practical guide. Learn essential strategies to ensure compliance and enhance accuracy.
Revenue recognition is the lifeblood of your business. But regulations like ASC 606 and SOX compliance can make it complicated. Strong SOX controls financial reporting and a solid understanding of ASC 606 controls are key. They're not just about checking boxes for auditors. They're about building a financially sound business. This guide provides actionable steps to streamline your processes, reduce risk, and gain greater control over your financial reporting. We'll also touch on how automated SOX solutions can help with SOX 606 compliance.
This section clarifies ASC 606, its core principles, and the role of SOX controls in financial reporting. Understanding these elements is crucial for accurate revenue recognition and maintaining compliance.
ASC 606 is a universal standard for recognizing revenue from customer sales. It provides a consistent framework for businesses across all industries to report their revenue. This standardization ensures that financial statements are comparable and transparent, regardless of the company's size or industry. Think of it as a common language for revenue reporting, making it easier for investors and stakeholders to understand a company's financial performance. For a deeper dive, check out this guide from Stripe.
Enacted after major corporate accounting scandals, the Sarbanes-Oxley Act of 2002 (SOX) protects investors by improving the accuracy and reliability of corporate disclosures. SOX isn’t just about preventing fraud; it’s about establishing trust and transparency in financial reporting. A critical aspect of SOX is its focus on internal controls for financial reporting, essential for maintaining accurate financial statements and ensuring dependable information for investors.
SOX contains several key sections directly related to financial reporting. Understanding these sections is crucial for any publicly traded company, or any company planning to go public. These regulations affect how you structure your financial processes and maintain compliance.
SOX requires publicly traded companies to establish and maintain adequate internal controls over financial reporting. This means companies must have systems and processes in place to ensure accurate and reliable financial statements. This protects investors by minimizing the risk of errors, misstatements, and fraud. Think of internal controls as checks and balances within your financial reporting process, designed to catch and correct issues. This involves clear documentation of procedures, regular reviews, and segregation of duties to prevent conflicts of interest.
Section 404 of SOX mandates that companies not only establish internal controls but also assess and report on their effectiveness. This includes an independent audit of these controls, providing additional assurance to investors. This independent audit isn’t just a formality; it’s crucial for ensuring compliance and building investor trust. It provides an objective evaluation of your internal controls and identifies any weaknesses.
Failing to comply with SOX has serious consequences. Non-compliance can result in significant financial penalties, including substantial fines for the company and even imprisonment for executives. Beyond the financial repercussions, non-compliance can severely damage a company's reputation and investor confidence, hindering future investment. Maintaining SOX compliance is not just a legal requirement; it’s critical for a healthy and trustworthy business.
SOX controls ensure that publicly traded companies report their finances accurately and honestly. This transparency builds trust with investors, fostering a stable and reliable market. By demonstrating a commitment to SOX compliance, companies signal to investors that they prioritize financial integrity and accountability. This protects investors and benefits the company by strengthening its reputation and attracting investment. For companies looking to streamline their SOX compliance and revenue recognition, automated solutions can be valuable. Solutions like those offered by HubiFi can help manage the complexities of these regulations, ensuring accuracy and efficiency in your financial reporting. Learn more by scheduling a demo or exploring our integration options.
ASC 606 outlines a five-step process for recognizing revenue:
These steps ensure a systematic and consistent approach to revenue recognition. It's worth noting that ASC 606 requires significantly more detailed disclosures than previous standards, meaning companies need robust controls to manage this increased disclosure burden, making strong internal controls essential.
SOX (Sarbanes-Oxley Act of 2002) aims to improve financial reporting accuracy and prevent fraud. It mandates specific internal controls to ensure the reliability of financial data. These controls cover various aspects of financial reporting, from data security to access management. Implementing SOX controls allows companies to establish effective internal control systems that promote accurate financial reporting, mitigate risks, and provide assurance to investors and regulators. They are essential for maintaining trust and transparency in financial markets. For practical guidance on SOX compliance, see this resource from Pathlock.
SOX controls are rules established after major corporate scandals like Enron and WorldCom in the early 2000s. These scandals eroded investor trust and exposed the need for stricter financial regulations. SOX controls aim to ensure publicly traded companies report their finances accurately and honestly (DataSnipper). The Sarbanes-Oxley Act of 2002 mandates these controls to prevent future accounting scandals and protect investors. These regulations affect how businesses of all sizes handle financial reporting.
SOX controls encompass a wide range of business processes. Common examples include access controls, restricting who can view and modify sensitive financial data. It's like a lock-and-key system for your financial information. Segregation of duties (AuditBoard) is another key control. This involves dividing responsibilities among different employees to prevent fraud and errors. For instance, the person approving invoices shouldn't process payments. Other important controls include IT security, data backups, and change management (Pathlock), ensuring data integrity and protecting against unauthorized changes.
SOX IT controls focus on the accuracy and security of IT systems handling financial data. These controls are crucial because system vulnerabilities can compromise financial reporting integrity. While not explicitly mentioned in SOX, cybersecurity is increasingly important for SOX compliance (AuditBoard). A data breach can severely impact a company's financial reporting and reputation. Strong cybersecurity measures, like firewalls and intrusion detection systems, are essential for protecting sensitive financial data (DataSnipper). Companies looking to streamline IT controls and ensure data integrity might consider automated solutions like those offered by HubiFi.
Management review controls (MRCs) are critical for SOX compliance. These controls involve management’s regular reviews of financial data to identify and address potential issues (AuditBoard). Think of it as a regular health check for your financial reporting. These reviews help ensure the accuracy of financial statements and provide additional oversight. Managers should regularly review key performance indicators, variance analyses, and other relevant financial information (Pathlock). By catching problems early, MRCs prevent small issues from becoming major financial reporting errors. This proactive financial management approach is essential for SOX compliance and stakeholder trust. Explore the HubiFi blog for resources and solutions to enhance financial reporting accuracy and streamline compliance efforts.
ASC 606 and SOX compliance might seem like separate entities, but they’re deeply intertwined. Understanding this intersection is crucial for accurate financial reporting and maintaining strong internal controls. Let's explore how these two regulations influence each other.
ASC 606 and SOX compliance might seem like separate entities, but they’re deeply intertwined. Understanding this intersection is crucial for accurate financial reporting and maintaining strong internal controls. Let's explore how these two regulations influence each other.
ASC 606 is the revenue recognition standard that provides a consistent framework for businesses to report revenue. This standardization ensures that financial statements are comparable and transparent, regardless of the company’s size or industry. Essentially, it creates a common language for revenue reporting, making it easier for investors and stakeholders to understand a company’s financial performance.
ASC 606 significantly impacts SOX compliance by increasing the complexity and volume of required disclosures. This necessitates more robust internal controls to manage this data and ensure its accuracy. More detailed reporting requires more stringent checks and balances. Robust internal controls are now essential not just for compliance but also for managing the sheer volume of information required under ASC 606.
SOX (Sarbanes-Oxley Act of 2002) aims to prevent financial fraud and improve the accuracy of financial reporting. SOX controls mandate specific procedures and documentation to ensure the reliability of financial data. With the increased complexity introduced by ASC 606, maintaining these controls becomes even more critical. Companies need to ensure their systems can handle the detailed tracking and reporting required by both regulations. For companies dealing with high-volume transactions, automating these processes through a solution like HubiFi can significantly streamline compliance and reduce the risk of errors. For more information on how HubiFi can help you manage revenue recognition and SOX compliance, schedule a demo.
ASC 606 introduces a five-step model for revenue recognition, requiring more detailed documentation than previous standards. This directly impacts your SOX requirements by increasing the need for robust internal controls to manage this new level of complexity. More data means more opportunities for errors, and stronger controls are essential to catch and correct those errors. As Baker Tilly points out in their analysis of ASC 606, companies need these controls to handle the increased disclosure burden. This isn’t just about ticking boxes for compliance; it's about building a reliable financial reporting system.
One of the biggest challenges companies face is aligning existing SOX controls with the new requirements of ASC 606. Even if your bottom-line financial results remain the same after implementing the new standard, you'll likely need new or updated internal controls. KPMG highlights the need for controls specifically designed for the transition period. This might involve revisiting your current processes, identifying gaps, and implementing new procedures to ensure compliance with both regulations.
Successfully integrating revenue recognition under ASC 606 with your SOX controls requires a comprehensive approach. It's not enough to simply adjust your accounting practices; you need to consider the broader impact on your internal control framework. Overlooking internal controls and disclosures can expose your company to significant risks. The transition to ASC 606 demands significant time, effort, and resources. Baker Tilly notes that companies that fail to prepare adequately risk material weaknesses in their internal control over financial reporting (ICFR) and potential regulatory issues. A proactive approach to integration is key to a smooth and compliant transition.
Strong internal controls are crucial for complying with both ASC 606 and SOX. Here’s how to align your revenue recognition process with SOX requirements:
Formalize your revenue recognition policy. This document should outline how your company applies the five-step ASC 606 model, including specific procedures for each step. A well-documented policy provides clarity for your team and serves as evidence of your commitment to compliance during audits. As KPMG notes, updated internal controls are essential even if your financial results don't change under the new standard. This documentation helps ensure everyone understands the process and provides a clear audit trail.
Establish a robust contract review and approval process. Before recognizing any revenue, ensure each contract meets all the necessary criteria: clear obligations for both parties, well-defined payment terms, demonstrable commercial substance, and a reasonable expectation of payment. This control helps prevent revenue leakage and ensures compliance with ASC 606’s core principle of recognizing revenue when performance obligations are met.
Clearly identify and list each distinct promise to transfer a good or service to the customer within your contracts. Tracking these performance obligations individually allows for accurate revenue allocation and recognition. This detailed tracking is essential for compliance and provides a granular view of your revenue streams.
Develop a systematic process for determining the transaction price for each contract. This includes considering any variable consideration, discounts, or other adjustments. Accurately allocating the transaction price to each performance obligation is crucial for proper revenue recognition.
Implement controls to ensure revenue is recognized at the appropriate time. Remember, revenue is recognized when a performance obligation is satisfied, not necessarily when the contract is signed or payment is received. Establish clear criteria for determining when a performance obligation has been met and implement processes to measure progress toward satisfying each obligation. This ensures compliance with ASC 606 and provides accurate financial reporting.
Robust internal controls are crucial for complying with both ASC 606 and SOX. They not only help ensure accurate financial reporting but also protect your company from potential financial and reputational damage. Let's break down how to build a strong internal controls framework.
Before implementing any controls, you need to understand your company's specific risks related to revenue recognition. Think about potential weaknesses in your processes, like inaccurate data or incomplete contract reviews. Once you've identified these vulnerabilities, you can design controls to mitigate them. Using a framework like COSO can provide helpful guidance as you assess these risks and build appropriate controls.
One of the most fundamental internal controls is the segregation of duties. This means dividing critical tasks among different employees to prevent fraud and errors. For example, the person who approves a contract shouldn't be the same person who records the revenue. This division of responsibilities adds a layer of checks and balances to your financial processes. Remember, SOX compliance isn't about checking off a predetermined list; it's about establishing controls that effectively address your company's unique risks.
Your IT systems play a vital role in maintaining accurate financial data. Implement controls to ensure data integrity, such as access restrictions and regular backups. Think about who has access to what information and how changes to that information are tracked and documented. These controls are essential not only for accurate revenue recognition but also for demonstrating SOX compliance during audits.
Protecting your financial data isn’t just a best practice—it’s a SOX requirement. Think of your data security measures as a lock on your financial information, keeping it safe from unauthorized access and accidental loss. This section covers why data security and backups are crucial for SOX compliance and adhering to regulations like ASC 606.
As the Sarbanes-Oxley Act (SOX) highlights, maintaining accurate financial records is paramount. Robust data security measures, like access controls and encryption, ensure the integrity of your financial data by preventing unauthorized changes or deletions. Regular backups provide an additional safety net, allowing you to recover your data in case of system failures, natural disasters, or even cyberattacks. These practices work together to create a secure environment for your financial information, demonstrating your commitment to SOX compliance.
Implementing a comprehensive data security policy is a key component of SOX compliance. This policy should outline procedures for protecting financial information, including access controls, data encryption, and regular backups. Restricting access, for example, limits who can view and modify sensitive data, reducing the risk of errors and fraud. Regular backups ensure that even if data is lost or corrupted, you can restore it quickly, minimizing disruptions to your business operations. A well-defined data security policy not only protects your financial information but also demonstrates your commitment to SOX compliance to auditors and stakeholders. For companies dealing with high-volume transactions, automated solutions can be particularly helpful in managing these complexities. Consider exploring resources like those offered by Hubifi for more information on automating data security and revenue recognition processes.
Setting up controls isn't a one-time task. You need to regularly monitor and test their effectiveness. This includes periodic reviews of your financial processes and controls to ensure they're operating as intended. Regular testing helps you identify any weaknesses or gaps in your controls and make necessary adjustments. This ongoing monitoring is key to maintaining consistent compliance and adapting to changes in your business or the regulatory environment.
Staying on top of ASC 606 and SOX compliance can feel overwhelming, but the right technology can streamline the process. Let's explore how.
Accurate revenue recognition is the backbone of any successful business. It gives you a clear understanding of your financial health. Inaccurate revenue recognition, however, leads to costly errors and wasted time fixing them. A Stripe study found 40% of finance leaders spend over 10 hours each month correcting these errors. Automating your revenue recognition process drastically reduces errors, freeing up your team for more strategic work. This also minimizes the risk of non-compliance, saving you potential headaches.
Using revenue recognition software makes compliance easier and more accurate, improving your chances of passing SOX audits. Look for software that automates complex calculations, handles various revenue scenarios, and generates detailed reports. These features are essential for demonstrating compliance with ASC 606. Robust reporting also provides valuable insights into your financial performance, empowering you to make data-driven decisions.
Successfully transitioning to ASC 606 and maintaining SOX compliance requires updated internal controls. As KPMG points out, these controls should be specifically designed to address the new standard's challenges. HubiFi offers automated solutions that integrate with your existing systems, ensuring data integrity and simplifying compliance. Learn more about HubiFi and how we can help streamline your revenue recognition process while maintaining SOX compliance. Schedule a demo to see HubiFi in action. You can also explore our integrations and pricing. For additional insights, visit our blog.
Staying compliant with ASC 606 and SOX can be complex. Using automated revenue recognition software simplifies the process. HubiFi, for example, offers automated solutions designed to handle the intricacies of ASC 606 and SOX compliance. Automating complex calculations ensures accuracy and frees up your team to focus on strategic initiatives. This reduces the risk of errors, which is especially important for the detailed reporting these regulations require. Plus, a clear audit trail, readily available through automated reporting, makes demonstrating compliance during audits much smoother. For more information on how HubiFi can help streamline your revenue recognition process while maintaining SOX compliance, learn more about HubiFi here.
Real-time data and analytics provide immediate insights into your business's financial health. With accurate, up-to-the-minute information about your revenue streams, you can make informed decisions and identify potential issues before they escalate. Automated revenue recognition solutions offer this visibility, allowing you to track performance obligations, monitor transaction prices, and understand the timing of revenue recognition. This improves your financial reporting accuracy and empowers you to adjust your business strategy proactively based on current data. For example, if a particular revenue stream slows down, you can quickly investigate and take corrective measures. This agility is crucial for maintaining a healthy financial outlook.
Integrating new software with existing systems can be a major hurdle. Choosing a solution that seamlessly integrates with your current accounting software, ERP, and CRM is essential for a smooth transition and ongoing efficiency. HubiFi integrates with popular business platforms, ensuring data integrity and minimizing disruptions to your existing workflows. This seamless flow of information between systems eliminates manual data transfer, reducing errors and saving time. It also provides a unified view of your financial data, making it easier to manage and analyze your revenue recognition process within your broader business operations. Learn more about HubiFi's integrations.
Successfully transitioning to ASC 606 and maintaining SOX compliance requires a structured approach. It's not just about checking boxes; it's about building a robust framework that supports accurate financial reporting and adapts to evolving regulatory landscapes. Here’s how to effectively manage this process:
First, thoroughly understand the nuances of ASC 606 and its implications for your specific business model. This involves identifying all contracts with customers, determining performance obligations, and establishing how revenue will be recognized. A comprehensive risk assessment, perhaps guided by the COSO framework, helps pinpoint potential compliance gaps and prioritize areas needing attention. This proactive approach, as highlighted by Baker Tilly, ensures you're not just compliant but also prepared for potential challenges. They discuss the importance of internal controls in the ASC 606 transition.
Don't underestimate the importance of internal controls and disclosures during your ASC 606 implementation. These are critical components of SOX compliance and should be addressed proactively. Clearly documented policies and procedures, robust approval processes, and regular reviews are essential. KPMG emphasizes this in their discussion of ASC 606 implementation, stressing that neglecting these areas can expose your business to unnecessary risks.
While spreadsheets might seem like a simple solution for tracking revenue, they are prone to errors and can quickly become unwieldy as your business grows. Leveraging specialized compliance software streamlines revenue recognition processes, improves accuracy, and provides the audit trails necessary for SOX compliance. Certinia's advice on complying with ASC 606 underscores the benefits of dedicated software for managing the complexities of revenue recognition and ensuring a smoother audit process. Automating these processes not only saves time but also reduces the risk of human error.
SOX compliance isn't a one-time event; it requires ongoing vigilance. Regularly review your financial processes, including your revenue recognition procedures, to ensure they align with ASC 606 and SOX requirements. This includes testing your controls, reviewing documentation, and staying informed about regulatory updates. Pathlock offers a helpful guide to SOX controls, emphasizing documentation and regular audits to verify their effectiveness. This continuous monitoring and adjustment are key to maintaining long-term compliance and minimizing risk.
Staying on top of ASC 606 and SOX compliance isn’t a one-time project—it’s an ongoing process. Let's explore how to identify potential risks, maintain compliance, and adapt to changes in the regulatory landscape.
Regularly assessing your revenue recognition processes helps you catch potential compliance issues early on. Think about areas where errors or inconsistencies might creep in. Maybe your sales contracts have non-standard terms, or perhaps your system for tracking performance obligations isn’t quite airtight. Even seemingly small issues can snowball into larger problems down the line. Maintaining strong internal controls is crucial, even if your financial reporting hasn’t drastically changed. This proactive approach helps you address potential problems before they impact your financial statements.
Even with the best intentions, companies can stumble when it comes to SOX compliance. Recognizing common pitfalls helps you proactively address these challenges and strengthen your internal controls. Let's explore some of the most frequent missteps.
One common pitfall is neglecting internal controls and disclosures. It's easy to get caught up in the day-to-day operations of your business, but overlooking these crucial aspects can expose you to unnecessary risks, as KPMG highlights. Strong internal controls are the backbone of accurate financial reporting and essential for demonstrating compliance.
Inadequate documentation is another frequent challenge. ASC 606 requires detailed documentation of your revenue recognition processes. Without it, demonstrating compliance during an audit becomes incredibly difficult. Robust internal controls are essential for managing the complexities of this documentation and ensuring accurate financial reporting.
Many companies also struggle with failing to adapt controls. As regulations evolve, so too should your internal controls. One of the biggest hurdles businesses face is aligning existing SOX controls with the new requirements of ASC 606, as noted by KPMG. Regularly reviewing and updating your controls is crucial for maintaining ongoing compliance.
Overlooking continuous monitoring is another area where companies often fall short. Implementing controls isn't a one-time activity. Regularly review your financial processes, including your revenue recognition procedures, to ensure they align with ASC 606 and SOX requirements. Ongoing monitoring is key for maintaining compliance.
Finally, inadequate training and awareness among employees can undermine even the most robust SOX controls. Everyone involved in financial reporting needs to understand the importance of compliance and their role in maintaining it. Effective internal control systems, supported by proper training, promote accurate financial reporting and mitigate risks.
Compliance isn’t a destination—it’s a journey. After implementing your SOX controls and ASC 606 processes, you need to make sure they continue working effectively. Regular compliance audits are essential for verifying your controls are operating as designed and catching any weaknesses. Thorough documentation of your compliance efforts is also key. This not only demonstrates your commitment to compliance but also provides a valuable resource for training and continuous improvement. Ignoring these ongoing maintenance activities can expose your business to significant risks.
The regulatory landscape is constantly evolving. New accounting standards and interpretations can emerge, requiring you to adjust your processes and controls. For example, the shift to ASC 606 introduced a greater need for detailed disclosures, placing a heavier burden on your internal controls. Staying informed about these changes and adapting your compliance program accordingly is essential. This might involve updating your revenue recognition policies, revising your control activities, or investing in new technologies to support your compliance efforts. A flexible and adaptable approach will help you stay ahead of the curve and maintain compliance. Successfully implementing and maintaining compliance with ASC 606 requires a comprehensive approach that goes beyond just accounting changes.
Audits are a critical part of maintaining SOX compliance and demonstrating adherence to ASC 606. Being prepared streamlines the process and minimizes potential disruptions. Here’s how to get ready:
Clear and comprehensive documentation is essential for demonstrating compliance with ASC 606. Keep meticulous records of your revenue recognition policies, contracts, performance obligations, and the allocation of transaction prices. This documentation not only helps internal teams stay organized but also provides auditors with a clear picture of your processes. Regularly reviewing your financial processes is also crucial. These reviews help ensure everything is working as expected and identify any potential issues early on. Think of it as routine maintenance for your financial reporting system. This proactive approach will make your audits smoother and contribute to stronger internal controls overall.
Auditors will likely have questions. Be prepared to respond promptly and thoroughly to their inquiries. This means having your documentation readily accessible and designating a point person or team to handle communication. Clear and concise responses demonstrate your commitment to transparency and compliance. Stay informed about the latest guidance from the SEC, particularly regarding disclosures related to SAB 74, to ensure your responses align with current expectations.
While internal preparation is key, consider bringing in external auditors and consultants, especially if your team has limited experience with ASC 606 or SOX compliance. External experts can offer a fresh perspective, identify potential gaps in your controls, and provide specialized guidance. They can also assist with staff training to ensure everyone understands the requirements and their roles in maintaining compliance. Using specialized revenue recognition software can also improve accuracy and efficiency. This investment can save you time and resources in the long run by preventing costly errors and ensuring a clean audit.
Staying on top of ASC 606 and SOX compliance requires a commitment to ongoing learning and development. This means equipping your team with the right knowledge and resources to handle these complex regulations. Here’s how to approach training and development for ASC 606 and SOX compliance:
Look for training programs that cover all aspects of ASC 606 and SOX compliance. These programs should explain the core principles of revenue recognition, internal control frameworks, and the specific requirements for documentation and reporting. A good program will offer practical guidance and real-world examples to help your team apply these concepts to your specific business operations. Investing in comprehensive training not only helps ensure compliance but also empowers your team to manage financial processes more effectively. As Baker Tilly points out, training is a crucial part of a smooth transition and helps meet auditor expectations.
Sometimes, internal training isn't enough. Consider bringing in external consultants who specialize in ASC 606 and SOX compliance. They can offer a fresh perspective on your current processes, identify potential gaps in your controls, and provide tailored recommendations for improvement. External consultants can also assist with implementing new software or technologies designed to streamline compliance efforts. KPMG emphasizes the importance of risk assessment and control implementation, and a consultant can be instrumental in this process.
Regulations change, and best practices evolve. Make continuous learning a priority for your team. Encourage them to participate in webinars, attend industry conferences, and stay informed about updates to ASC 606 and SOX requirements. This ongoing education will help your organization adapt to changes, maintain compliance, and proactively address any emerging challenges. Staying informed is key to long-term success, especially since maintaining ASC 606 compliance is an ongoing process, not a one-time project.
Successfully navigating ASC 606 and SOX compliance requires a proactive and adaptable approach. These best practices will help your business stay ahead of the curve.
ASC 606 is a principles-based standard. This means companies have more flexibility in applying the standard, but it also leads to more estimations and judgments. This flexibility can create inconsistencies if not carefully managed. Establish clear, documented policies and procedures for revenue recognition to ensure everyone on your team follows the same process. This consistency is crucial not only for accurate financial reporting but also for demonstrating compliance to auditors. A well-defined revenue recognition policy acts as a guide for your team and provides a solid foundation for SOX compliance.
Implementing ASC 606 often requires significant changes to accounting systems and processes. Invest in training your staff to understand the new standard and how it impacts their daily work. Consider bringing in external consultants to help with the transition, especially if your team has limited experience with the standard. Successfully implementing ASC 606 requires a comprehensive approach that goes beyond just accounting changes. It involves managing the people side of change, ensuring everyone understands their roles and responsibilities in maintaining compliance.
Regularly review and update your control processes. Even if your financial results don’t change significantly under ASC 606, you'll likely need new or updated internal controls. Pay particular attention to controls specifically designed for the transition period. Regular compliance audits are essential to verify your controls are in place and working correctly. Meticulous documentation of your compliance efforts is also key. This documentation provides evidence of your commitment to SOX compliance and helps identify areas for improvement. Learn more about how HubiFi can streamline these processes and reduce your compliance burden.
How does ASC 606 affect my business if my financial results stay the same after implementation?
Even if your bottom-line numbers don't change drastically, ASC 606 requires more detailed documentation and disclosures. This means you'll likely need new or updated internal controls to manage this increased complexity and ensure SOX compliance. Think of it as upgrading your financial reporting system, even if the output looks similar.
Our current SOX controls seem adequate. Do we really need to change them for ASC 606?
ASC 606 introduces a new level of detail in revenue recognition. Your existing SOX controls might not be designed to handle this increased complexity. It's crucial to review your current controls, identify any gaps, and implement new procedures to ensure they align with the specific requirements of ASC 606.
What's the biggest mistake companies make when implementing ASC 606?
Overlooking the impact on internal controls and disclosures is a common pitfall. Companies often focus on the accounting changes but neglect the necessary adjustments to their control framework. This can lead to compliance issues and potential problems during audits.
What’s the most efficient way to manage the complexities of ASC 606 and SOX compliance?
Using specialized software can significantly streamline the process. Look for software that automates complex calculations, handles various revenue scenarios, and generates detailed reports. This not only improves accuracy but also simplifies demonstrating compliance during audits.
How can I stay ahead of the curve with ASC 606 and SOX compliance?
Make ongoing education a priority. Regulations and best practices change, so it's essential to stay informed about updates and adapt your compliance program accordingly. Regularly review your processes, invest in training, and consider engaging external experts for guidance.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.
Copyright © 2025 HubiFi | All rights reserved.
