More than 60 percent of the insurance companies are not prepared to implement a new auditing standard, according to a survey conducted by top 10 accounting firm Baker Tilly Virchow Krause, LLP (Baker Tilly). The survey found that these organizations have revenue streams subject to Accounting Standards Codification (ASC) 606, revenue from contracts with customers.
“Many insurers initially thought they would not be subject to the new ASC 606 standard because insurance contracts accounted for under ASC 944 were out of scope,” Jason Jacobs, CPA, partner with Baker Tilly’s financial services practice group, said. “However, it is important to understand that insurance organizations are still subject to the standard for other revenue streams that do fall under ASC 606.”
“With the first effective date rapidly approaching, insurers should carefully review how their organizations are affected by ASC 606,” Jonathan Zeigler, CPA, partner with Baker Tilly’s insurance industry practice, said. “Implementation may affect a variety of business functions, so internal resource constraints must be considered when looking to assess and implement updated internal controls and processes.”
Baker Tilly recently held an educational webinar, “ASC 606 for insurance organizations: Who is affected and what are the impacts,” to assist insurance organizations in preparing for implementation of the new revenue recognition standard.
The webinar presenters discussed:
- The main elements of ASC 606
- Revenue streams that may be impacted under ASC 606
- The extent to which organizations may be affected (time, effort, resources, internal controls, processes etc.) and the timeline to implement changes