FASB formally proposes revenue recognition changes

By Ken Tysiac

FASB’s efforts to resolve challenges with the new revenue recognition standard continued Tuesday when the board formally proposed targeted changes that are intended to clarify guidance related to identifying performance obligations and licensing.

The proposal stems from input the board received from the transition resource group that provides joint feedback on the converged standard to FASB and the International Accounting Standards Board (IASB), which have been working together to develop more uniform standards.

The IASB has agreed to propose changes to its own standard as a result of discussions with the joint transition resource group, but the boards’ proposals will differ in some areas.

FASB’s proposed Accounting Standards Update, Revenue From Contracts With Customers (Topic 606): Identifying Performance Obligations and Licensing, seeks to address areas where there is potential for diversity in practice.

The proposal also is designed to reduce the cost and complexity of applying the standard at implementation and on an ongoing basis. Comments are sought by June 30 and can be provided on FASB’s website.

The possible changes to the standard are one reason that FASB last month proposed a deferral in its effective date. Board members said financial statement preparers may need more time to update their processes and systems based on the proposed changes.

FASB proposed delaying the effective date one year so that public organizations would be required to apply the new revenue recognition standard to annual reporting periods beginning after Dec. 15, 2017. Nonpublic organizations would be required to apply the new standard to annual reporting periods beginning after Dec. 15, 2018. Early adoption would be permitted.

The IASB has proposed a similar delay in the effective date of its standard.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

News quiz: Taking an economic snapshot and looking to the future

Recent news included IRS actions that affect individuals and partnerships and a possibly influential move by a Big Four accounting firm.Take this short quiz to see how much you know about the news.