Executives have a lot of accounting and finance trends and changes to keep an eye on in 2017. There are plenty of changing accounting standards, economic trends, and regulations to watch. Here are a few that we think are most critical as you plan ahead.
New President, New Regulatory Changes
Unless you’ve been living under the proverbial rock, you might be loosely aware that the U.S. has a new president. While it’s yet to be seen how policies will play out, we can definitely expect changes in industry-specific regulations and tax policy. While we have no specific guidance to provide here, we’d just remark that this is critical to monitor. As with any new administration, there will likely be law changes and other new information that you need to process in order to direct your organizations’ steps going forward.
Revenue Recognition Changes
By now, you’re probably well aware of FASB’s 2014 Accounting Standards Update pertaining to changes in revenue recognition. This is the year that these standards really need to be in effect in your accounting systems, particularly if your organization issues comparative (multi-year) financials.
At present, public business entities, certain not-for-profit entities, and certain employee benefit plans must apply the new standards to annual reporting periods beginning after December 15, 2017. All other entities must apply the standards for periods beginning after December 15, 2018. The issue really occurs if you report multiple periods simultaneously, such as three-year financials. If the standards kick in for your 2019 calendar year financials, your reports for 2018 and 2017 will also need to comply with the new standards. It will also be extremely important to understand what effects the changes will have on the appearance of financial statements, and the computation of common metrics so that you know how to interpret financials going forward.
Our point? You need to be good to go on these standards now, not later. Fortunately, the AICPA has some great guidance on the revenue recognition standards here.
The Gig Economy is Growing
Millennials continue to turn traditional industries on their heads. Many prefer to work in “gig” fashion, as opposed to being a full-time employees for a single company. The accounting industry is not immune to this trend. When filling positions, it may be beneficial to consider hiring several freelancers for specific roles, rather than seeking to fill fewer full-time or in-house, part-time roles. Savvier executives are finding ways to make this work within their organizations’ existing HR and structural frameworks. The trend is only growing, so it’s worth looking into.
CPA Exam Changes
Back in 2013, the AICPA began to look into developing a new version of the CPA exam. This was done to ensure the exam’s success in modern accounting marketplace. The CPA exam was already one of the hardest on the planet, making this a pain point for aspiring accountants. The changes will be launched in Q2 of 2017. The subject matter and sections (AUD, BEC, FAR, and REG) aren’t different. However, the manner in which the subjects are tested will change, based upon an assessment of higher-order skill sets.
If you have CPA candidates who are ready to take the exam, there are a few things to consider. Most of the CPA review services will have products modified to the new style of questions the exam will deliver. If your organization purchases review materials for its CPA exam candidates, be aware of the version you receive. Further, current candidates may wish to complete the exam sooner in order to take the older style. A similar rush to complete the exam occurred before Q2 of 2004, when the exam went paperless. Other candidates may wish to actually wait until the changes take effect and study accordingly. While this change isn’t Earth-shattering, it’s worth being aware of since it may significantly impact any of your staff sitting for the exam.
Rising Interest Rates
The Federal Reserve has stated that it is ready to slowly raise interest rates and it officially did so in its 2016 Q4 meeting, while also setting some additional targets for 2017 and beyond. While most pundits view this as a positive sign for the U.S. economy (namely, that it suggests that the Fed views the economy as strong enough to bear the increases), it will still naturally increase borrowing costs. If your organization is looking to obtain new financing, you may wish to accelerate borrowing timelines in order to take advantage of lower rates while they last.
This list isn’t exhaustive, but will hopefully get you thinking about the factors that may impact your organization this year.