Accountants are facing an onslaught of new financial reporting standards, particularly the revenue recognition and leasing standards, while resorting to various strategies to deal with them.

At the Institute of Management Accountants’ annual conference in Indianapolis on Tuesday, Margaret Smith, a project commercial manager at Bombardier Transportation, described how she has been dealing with the International Financial Reporting Standards version of the revenue recognition standard, IFRS 15, at the Canadian company.

One of the steps in implementing the revenue recognition standard is to identify the separate performance obligations, but that in turn leads to a series of questions that need to be answered. “Are they capable of being distinct?” Smith asked. “Does the customer benefit on its own with the resources it already has, or is it distinct in the context of the contract? Is it a separate promise in the contract? Is it itemized separately? What you need to do is look at your contract and look for the list of deliverables required in that contract. Remember, it may be different than your payment plan.”

Various other wrinkles might be encountered. “If a customer cancels your contract right in the middle of your installation and says, ‘I don’t like this and we’re not doing it,’ if they cancel your contract, typically if you have a termination for convenience like that, there is a statement in there that they will pay you for the work to date. Then, because you can’t take what you did and say, ‘OK, you don’t want it. I’ll give it to this person,’ you can’t do that with a custom installation of software, and they have to pay you so you can actually recognize the revenue over time as you implement the installation of that software. You have to look at the clauses in the contracts. The terms and conditions may be separate from the technical specifications, which they typically are. Look for where they say I can cancel this contract and what are the specific words that are used.”

She noted that some companies have needed to report substantially less revenue under the new standard than they had previously been reporting under their local version of GAAP. Even though the IFRS version of the revenue recognition standard isn’t completely converged with the U.S. GAAP version, the numbers will now be much more comparable internationally.

Jonathan Crawford, chief technology officer at LeaseAccelerator, has been seeing some problems with the leasing standard, which is far less converged than the revenue recognition standard. His company announced a new online training curriculum to accelerate adoption of and compliance with the U.S. GAAP and IFRS versions of the leasing standards, ASC 242 and IFRS 16, on Wednesday. At the IMA conference Monday, he discussed some of the complexities he has been seeing. “With the accounting standard, you now need to know why,” he said. “Business context affects the accounting. ASC 242 is not a bigger, fatter calculator. It’s not just some different calculations. It’s process controls. It’s understanding that things like context now affect the accounting in ways they haven’t before. There’s going to have to be engagement across the organization.”

Crawford has heard of demand from some of the major firms for additional guidance on a particular aspect of the leasing standard related to observable standalone prices.

Wesley Bricker, chief accountant at the Securities and Exchange Commission, believes there is already plenty of interpretive guidance available. “In terms of the accounting interpretation questions, I think those have been resolved at this point,” he said at the IMA conference Tuesday. “We remain open to any new issues that might be raised. We’re well poised to address them, but the interpretive questions I think have been resolved.”

The Pine Hill Group, an accounting consultancy and MA advisory firm, recently released its own guidance paper on FASB’s ASC 842 lease accounting standard. “The most critical matter to consider right now is the sense of urgency behind this,” said William Andreoni, a senior director in Pine Hill Group’s SEC and Financial Reporting practice, during a recent phone interview. “This is a matter in which most companies in the public world will have to be compliant by year end.”

Andreoni advises companies to collect all their leases, both explicit leases and embedded leases that may be hidden inside other contracts. “The most prudent first step is what we call collection,” he said. “It’s gathering all the leases, understanding where your lease activity exists, how you engage in your lease activity, and who you engage with that lease activity with. The other really critical matter is that when you define what a lease is, it’s not just your explicit leases. There’s also the element of embedded leases, things that aren’t quite as explicit, and you might have to dig a little bit deeper for them.”

Technology may help speed up the process as the effective date of the leasing standard approaches.

“Depending on the volume of leases you’re engaged with, technology should absolutely be a consideration,” said Andreoni. “It has to be something you look at early in the process. Given all the unknowns that still exist, similar to what we learned in the world of rev rec, start now. Time is of the essence. Summer, fall, they’re going to go by quickly. Compliance is right around the corner.”