Revenue recognition: Do companies have enough time for implementation?

BY KEN TYSIAC
May 1, 2014

Companies may face a serious time crunch with implementation of the new, converged financial reporting standard for revenue recognition despite a seemingly long transition period, General Electric Controller and Chief Accounting Officer Jan Hauser said Thursday.

The much-delayed standard, which has been approved by FASB and the International Accounting Standards Board (IASB), is expected to be released by the end of this month, FASB Chairman Russell Golden said during a panel discussion on how to implement the standard.

The standard will take effect for public companies for reporting periods beginning after Dec. 15, 2016 (FASB), or reporting periods beginning on or after Jan. 1, 2017 (IASB).

But during the panel discussion at the 13th annual Financial Reporting Conference at Baruch College in New York City, Hauser said companies will be challenged to do a full retrospective transition in the time that’s provided.

Companies that choose to do a full retrospective transition would need to start capturing data by Jan. 1, 2015, to demonstrate comparability. That may require answering difficult questions and implementing complicated systems in a short time, Hauser said.

“I think we’re going to need potentially more time than what we’re being allotted in implementing the standard,” Hauser said at the Baruch conference. “We thought we would have had it out quite a while ago and had a lot of time. And particularly for companies that actually want to think about full retrospective or are needing to change systems … it’s a huge undertaking.”

Hauser said in an interview that she believes there will be a dialogue with standard setters about the implementation date after the transition resource group set up by FASB and the IASB gets feedback from financial statement preparers.

Golden said in an interview that FASB is aware of concerns about the implementation date and is open to conversation about the issue. “We have gotten the question,” Golden said. “… We want people to get the standard, digest it, and if they think they need more time, we’re happy to engage in a dialogue about that.”

Delays in the release of the standard have contributed to the time crunch. At one point, the standard was expected to be issued as early as the middle of 2013. But concerns among board members led to additional deliberations last year. Of late, the drafting and review process has taken substantial time.

Hauser said the standard will require companies to:

  • Evaluate contracts.
  • Determine how to account for contracts that have been modified.
  • Determine whether they are recognizing revenue at a point in time or over time.
  • Consider changing their financial reporting systems.


“So this is huge,” Hauser said. “It’s a huge undertaking, and it’s not just the accountants. We’re going to have to incorporate cross-functionally, and finance leaders and tax and other pieces within our organization are going to be part of the evaluation.”

Hauser said the full retrospective method may be preferable for companies because revenue is an important metric that preparers might want to portray consistently over a period of years. But she is concerned about having enough time to do it.

“It’s going to be a huge process,” she said. “We’re going to have to think about what we do if [full retrospective] is where we want to end up at the end of the day. We’re there now. We have to start now. And we don’t even have the final rule.”

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

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