Addressing Pre-Contract Costs When Implementing Revenue Recognition Standards

Pre-contract costs are capitalized on the balance sheet and amortized into the contract over the life of the contract.  If you have significant pre-contract costs that need to be capitalized on the balance sheet, what do you need to consider in order to implement this portion of the new standard? Here are a few suggestions:

  • Who is responsible for determining pre-contract costs?
  • Where are they charged in the accounting system?
  • How are they tracked in the accounting system?
  • How do they get amortized into the job?
  • With what frequency will they be amortized into the job?
  • Who is responsible for making sure they are amortized into the job?
  • Do any system changes need to be made to properly account for the pre-contract costs implementation?
  • Do any changes need to be made in internal controls to properly account for pre-contract costs?

Asking these questions will help mitigate the surprises that often appear when implementing this change within your organization. This is only a surface of items to address and consider. Therefore, KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition. If you have any questions about this information please contact your KatzAbosch representative; or contact us by clicking here.

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