Retailers slow to change accounting practices

January 23, 2019

The retail industry is undergoing a period of transformation as nimble disrupters enter the marketplace, online sales continue to grow rapidly and new digital technologies empower consumers. To find out if these changes are causing retail finance leaders to modify their accounting practices and financial reporting, Ernst & Young LLP and the Retail Industry Leaders Association surveyed finance executives at more than 40 retailers, representing a wide array of product categories.

Respondents shared that many accounting practices remain unchanged:

• 56 percent value inventories through cost averages, the most widely used method.
• 51 percent of retailers report only one segment.

Changes in how companies operate are having an impact on accounting:

• 59 percent of retailers recognize e-commerce revenue at customer delivery (down from 63 percent in 2007), with 29 percent recognizing revenue at shipment (up from 22 percent).
• 15 percent of retailers are allocating online sales to stores in their ASC 360 impairment analysis.

Retailers are starting to adopt new technologies:

• 17 percent of retailers are using radio-frequency identification (RFID) in the physical inventory management process.
• 15 percent are employing robotic process automation (RPA) in the finance function.

See all the results in the full 2018 Retail Accounting Policy Survey.

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