Ernst & Young recently released its 2018 Retail Accounting Policy Survey in collaboration with the Retail Industry Leaders Association. Finance executives from more than 40 companies across the retail industry responded, including leaders at department stores, grocers and specialty retailers.
Mindy Dragisich, partner, assurance services, consumer products & retail at EY, and Kathleen McGuigan, executive vice president and deputy general counsel at RILA, write that the “retail industry is experiencing a period of transformation” in their forward.
That much is obvious, but they expanded: “Nimble disruptors are entering the marketplace, online sales are growing rapidly, and new digital technologies are empowering consumers, giving them unprecedented transparency, choice and convenience.”
They also identify a few tips for retailers trying to differentiate themselves in this new space: an improved customer experience both in-store and online and transparency when it comes to product sourcing and delivery as more consumers are concerned about the ethical implications behind their purchases.
Dragisich and McGuigan expect technology to continue to have a large impact on retail, not just in the e-commerce space, but on the physical inventory management process and in the finance function itself. The report indicated few retailers are using radio-frequency identification technology for physical inventory management or robotic process automation (RPA) in finance.
Ironically, RPA is one piece that might help retailers handle recent revenue recognition changes, as well as other accounting standards, but only 15% of retailers reported using it.
“Today most retailers recognize their e-commerce business once the product is delivered to the customer’s door,” Dragisich told Accounting Today. “As part of this new accounting standard, we found there were some changes to that in terms of the retailers going through the analysis and determining the point of control was actually the shipping point and actually accelerating the timing of when they would recognize the revenue for products that are more e-commerce revenue.”
Under the old standard, the survey found that 63% of retailers recognized revenue once the product was delivered to the customer, while 22% recognized it once it was shipped. Now, 59% recognize it upon delivery and 29% recognize it once the product is shipped.
Visit ey.com/us/en/industries/consumer-products to view more resources related to the 2018 survey.