Understanding Transition Under the New Standard

There are several methods to transition: full retrospective or modified retrospective.  Full retrospective restates all prior periods included in the financial statements.  Modified retrospective allows you to report 2018 under old GAAP and 2019 under new GAAP, however, you need to disclose 2019 information under old GAAP.  Both of these methods require you to calculate one year under two different methods.  (See chart below.)

We are recommending one of the following simplified alternatives:

  • Not issuing comparative statements for 2019.  This is the most simplistic approach.  You need to talk to the users of your financial statements now to determine if they will accept single year statements for 2019.  Be sure to articulate that comparative financial statements could result in a significant unnecessary cost to the business with no real value add (as one can use the 2018 statements).
  • Have a GAAP departure indicating the required disclosures (2019 under old GAAP) are not included in the comparative financial statements.  This option is more costly than single year statements, but could be a significant savings from a complete set of comparative financial statements. You would be reporting under Option 2 below, but not disclosing 2019 information under the prior method.

KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition.  Ready to implement this area, click here to determine the most appropriate transition for your organization.

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