FASB Seeks Public Comment on One-Year Deferral of New Revenue Recognition Ruleby
Individuals and organizations can now comment on a possible new effective date for the US accounting standard on revenue recognition, after the Financial Accounting Standards Board (FASB) on April 29 issued a proposed Accounting Standards Update that recommends deferring the new rules for one year.
The FASB is encouraging stakeholders to review the exposure document and submit comments on the proposal by May 29. Instructions on how to submit feedback can be found in the proposed Accounting Standards Update.
The proposal to delay the effective date until 2018 comes nearly a year after the FASB and the International Accounting Standards Board (IASB) issued their final joint standard on how companies should recognize revenue from contracts with customers under both US Generally Accepted Accounting Principles and International Financial Reporting Standards (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.
The IASB on April 28 also agreed on a proposal to push back the revenue rule’s start date from 2017 to 2018 for companies that use IFRS. According to a release on the IFRS website, the reason the IASB supported a one-year delay is it “is planning to issue an exposure draft with proposed clarifications to the standard, as well as the desire to keep the effective date of the IASB’s and the FASB’s revenue standards aligned.”
The FASB’s proposed Accounting Standards Update, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, would permit US public organizations to apply the new revenue standard to annual reporting periods beginning after Dec. 15, 2017. US nonpublic organizations would be permitted to apply the standard to annual reporting periods beginning after Dec. 15, 2018.
Public organizations would apply the new revenue standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2017. A public organization would be required to apply the standard beginning in the first interim period within the year of adoption. Nonpublic organizations would apply the standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2019. A nonpublic organization would not be required to apply the standard in interim periods within the year of adoption.
Additionally, the proposal would permit both public and nonpublic organizations in the United States to adopt the revenue recognition standard early, but not before the original public organization effective date (annual periods beginning after Dec. 15, 2016).
The IASB’s proposal would also allow for early adoption of the revenue standard.