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FASB Wants to Defer Revenue Recognition Standard

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Apr 1st 2015
Staff Writer and Editor AccountingWEB
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The Financial Accounting Standards Board (FASB) on Wednesday proposed a one-year delay to the effective date of the new revenue recognition standard.

The revenue guidance, which was officially issued by the FASB and the International Accounting Standards Board in May 2014, standardizes how companies should recognize revenue in financial statements under both US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards.

Public companies using US GAAP would have been required to apply the standard for annual reporting periods beginning after Dec. 15, 2016. US private companies and organizations were required to apply the revenue standard for annual reporting periods beginning after Dec. 15, 2017.

But several companies had expressed to the FASB their concern that the effective date would not give them enough time to update their systems and processes. According to a recent Journal of Accountancyarticle, companies choosing a full retrospective transition would have needed to start capturing data by Jan. 1, 2015, to demonstrate comparability.

Under the new FASB proposal, public organizations would apply the revenue standard to annual reporting periods beginning after Dec. 15, 2017. Nonpublic organizations would apply the revenue standard to annual reporting periods beginning after Dec. 15, 2018.

According to the FASB, public organizations would apply the revenue standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2017. (A public organization would be required to apply the revenue standard beginning in the first interim period within the year of adoption.) Nonpublic organizations would apply the revenue standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2019. (A nonpublic organization would not be required to apply the revenue standard in interim periods within the year of adoption.)

FASB staff had recommended a two-year delay for public companies, but the board decided to propose a shorter deferral, according to a Wall Street Journalarticle.

Additionally, the FASB decided to allow both public and nonpublic organizations to adopt the revenue standard early, but not before the original effective date for public companies (annual periods beginning after Dec. 15, 2016). A public organization would apply the revenue standard to all interim reporting periods within the year of adoption. A nonpublic organization would not be required to apply the revenue standard in interim periods within the year of adoption.

The public will have 30 days to comment on the proposal once the FASB issues an Accounting Standards Update. The update is expected to be issued in the coming weeks, according to the FASB.

Related article:

FASB, IASB Unveil Final Standard on Revenue Recognition

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By KaylaMatthews
Jun 25th 2015 20:12 EDT

"...the FASB decided to allow both public and nonpublic organizations to adopt the revenue standard early..." BDO's recent FASB report also suggests that the IASB might propose a similar option, but hasn't officially indicated whether they will or not yet.

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