Do preparers have answers to revenue recognition questions?

Financial statement preparers need answers to their accounting questions to implement the new revenue recognition standard in a timely manner, SEC Chief Accountant James Schnurr said Monday at the AICPA Conference on Current SEC and PCAOB Developments in Washington.

If the questions require additional rule-making by the standard-setting boards, a delay in the implementation date may be appropriate, he said.

FASB and the International Accounting Standards Board (IASB) released their new, converged revenue recognition standard in May of this year. The standard is scheduled to take effect for reporting periods beginning after Dec. 15, 2016, for U.S. public companies, or reporting periods beginning on or after Jan. 1, 2017, for companies that use IFRS.

But preparers have questions on how to apply the guidance, Schnurr said. Some of the questions may need simple clarifications about what the boards intended when they created the standard. Others may require additional action from FASB and the IASB, he said.

FASB and the IASB formed a Transition Resource Group that is meeting regularly and taking questions about implementation back to the boards, where necessary.

Schnurr is optimistic that the boards will address the implementation questions, but he told reporters after his speech that the implementation date may need to be delayed. Some companies have called for a delay because they don’t have answers to questions, but they will need to have their systems in place by the beginning of 2015 to capture information for a full retrospective transition.

“I think, potentially, there could be a delay,” Schnurr said. “I think it depends on a number of things, but if the parties determine that there were implementation issues that required additional standard setting, I would think that would be a reason you’d have to delay the adoption.”

For example, Schnurr said, some preparers have questions about identification of performance obligations and the accounting for licenses that is placing stress on their ability to implement the standard by its effective date.

Schnurr said the questions about the standard generally fall into two categories:

• Questions on how to apply the guidance to particular fact patterns.
• Questions about process and systems changes necessary for implementation.

The SEC is interested in seeing these questions answered because comparability is important, Schnurr said.

“Comparability is a hallmark of U.S. financial reporting,” he said. “And I believe that it is in the best interests of all parties to identify and address potential diversity in practice on the front end of the implementation effort, as doing so should avoid significant costs of narrowing practice after adoption for preparers and avoids the lack of comparability for users.”

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