Final IASB approval of rev rec standard imminent

BY KEN TYSIAC

Progress toward a converged financial reporting standard for revenue recognition continued Wednesday when the International Accounting Standards Board (IASB) indicated its intention to approve the standard.

The board’s staff now will prepare a ballot draft for a final vote. FASB also voted earlier this month to proceed to a ballot draft for the standard. Passage of the standard would represent one of the crowning achievements of the convergence process.

Revenue is considered one of the most important items in financial statements, and the standard is designed to create worldwide comparability—at least within a given industry—while eliminating voluminous, industry-specific guidance that exists in current U.S. GAAP.

The final standard is scheduled to be released in the first quarter of 2014. It would take effect for reporting periods beginning after Dec. 15, 2016 (FASB), or reporting periods beginning on or after Jan. 1, 2017 (IASB).

The new standard would require entities to follow a five-step process for revenue recognition:

  • Step 1: Identify the contract with a customer.
  • Step 2: Identify the separate performance obligations in the contract.
  • Step 3: Determine the transaction price.
  • Step 4: Allocate the transaction price to the separate performance obligations in the contract.
  • Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.


Some late changes approved by the boards last month introduce slight divergence to the proposal. The boards voted to add a collectibility threshold, requiring that entities would have to determine that collectibility is probable in order to recognize revenue.

Because “probable” is defined slightly differently in IFRS and U.S. GAAP, that change created a small amount of inconsistency between the FASB and IASB proposals. Nonetheless, the standard is considered to be substantially converged, and IASB members applauded heartily after deciding to move ahead with preballot drafting.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

8 accounting and auditing issues you can’t afford to ignore

Download this sponsored report for an overview of some of the most important developments accountants and auditors are facing today.

DOWNLOAD

Filing season quick guide — Tax year 2014

Tax season started Jan. 20. Download our “quick guide,” a printable card that contains dollar thresholds, tax tables, standard amounts, credits, and deductions to keep at your fingertips during tax season.

TAX NEWS

Expired tax provisions extended for 2014

President Barack Obama signed legislation that retroactively extended more than 50 expired tax provisions for 2014, allowing taxpayers to take advantage of a host of tax incentives during this filing season.