General Inquiries

ASC 606 Affect on Cash Flow Projections

  • 1.  ASC 606 Affect on Cash Flow Projections

    Posted 27 days ago
    Hello!!

    I'm curious to know how other companies are factoring in the ASC 606 adjustments into the cash flows projections. Currently, we are keeping a dual method of projections going, but it is hard to predict the contract assets for project we haven't bid/won yet. My concern is large swings between predicted and actual that could impact decision making.

    Thanks in advance!

    Katie

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    Katharine Baldwin CCIFP
    Assistant CFO
    Dutra Group
    San Rafael CA
    (415) 455-8037
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  • 2.  RE: ASC 606 Affect on Cash Flow Projections

    Posted 26 days ago
    Katharine,

    Hello.

    That is a very good question.
    My opinion, (and just an opinion) ASC 606 will have a marked difference on how some project based companies record revenue (and the corresponding balance sheet adjustments), and on others, the difference will be minor.

    I worked for a large engineering and construction firm where the difference in applying ASC 606 v. SOP 81-1 will make a large difference, speeding up the recognition of revenue.
    I now work for a more traditional general contracting firm, doing both large and small jobs, where the difference between ASC 606 v. SOP 81-1 will be much less pronounced.

    It will be good to see the responses to your post, and I look forward to following this thread.

    To get to your question....
    The level of adjustments in cash forecasting may depend on if your company uses a balance sheet approach in forecasting, or a billings, collections, accounts payable, payments approach (more operational approach).  The application of ASC 606 using a balance sheet approach will need to be considered.
    Conversely, ASC 606 may not have a material difference on the billings and collections of projects.  If the operational approach is used by your company to forecast, there may not be much of an impact.  That said, ASC 606 concepts may promote different thinking going forward in designing schedules of values - and will make a difference in projected billings.

    Thank you for the question!!

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    Joseph Harper CPA, CCIFP
    CFO
    Greater Dayton Construction Group
    Beavercreek OH
    (740) 607-1449
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