The Financial Accounting Standards Board (FASB) on July 9 agreed to push back the effective date of the new revenue recognition standard by one year for all entities.
The FASB expects to issue its final Accounting Standards Update formally amending the effective date by the end of the third quarter of 2015.
As a result of the board's vote, public companies, certain not-for-profit organizations, and certain employee benefit plans will now apply the new revenue standard to annual reporting periods beginning after Dec. 15, 2017, as well as interim reporting periods within the year of adoption. These entities may adopt the revenue recognition standard early, but not before the original effective date of Dec. 15, 2016. The standard can also be applied early to all interim reporting periods within the year of adoption.
All other entities will apply the standard to annual reporting periods beginning after Dec. 15, 2018, as well as interim reporting periods within annual reporting periods beginning after Dec. 15, 2019. Also, early adoption for all other entities will be permitted but not before the original Dec. 15, 2016, effective date. However, these entities will not be required to apply the new revenue standard until interim periods after the first year of adoption.
The International Accounting Standards Board (IASB) agreed on a proposal in April to push back the revenue rule's start date from 2017 to 2018 for companies that use International Financial Reporting Standards (IFRS). The IASB's proposal would also allow for early adoption of the revenue standard.
The FASB and the IASB officially issued the converged standard on the recognition of revenue from contracts with customers in May 2014. The new guidance standardizes how companies should recognize revenue in financial statements under both US Generally Accepted Accounting Principles (GAAP) and IFRS.
On April 1, the FASB made the recommendation to delay the standard for one year after several companies expressed concern that they would not have enough time to update their systems and processes before the rule changes were scheduled to take effect in 2017.