Taking the concept of ‘convergence’ to heart, the start date of new revenue recognition guidelines is likely to be delayed internationally now, following recent actions in the U.S.
According to multiple reports this week, including the Wall Street Journal and Compliance Week, the international rule makers at the International Accounting Standards Board (IASB) will propose when they meet next week that the new rules take effect in 2018 rather than 2017 for companies outside the U.S., matching the proposal earlier this month by the Financial Accounting Standards Board (FASB) for U.S. firms.
The two governing bodies announced the newly converged standards last year for inclusion in IASB’s library as IFRS 15, and entered into FASB’s Accounting Standards Codification© as Topic 606 by Accounting Standards Update 2014-09 “Revenue from Contracts with Customers.”
“IFRS 15 is a converged standard with U.S. GAAP,” IASB staff noted in advance of the board meeting scheduled for April 28. “We think that it is less confusing for the market if both IFRS and U.S. GAAP preparers apply the new standard at the same time.”
IASB staff analysis pointed out that FASB’s shift toward a deferral, which will likely become more formalized in June, would result in key timing differences with those filing under U.S. GAAP waiting until 2018 to apply the new standard while IFRS filers starting in 2017. IASB already permits early adoption of the new standard, an opportunity now being proposed by FASB along with their proposed deferral.
Kathy Pearson, Director of Technical Accounting at Zuora RevPro, feels that IASB’s delay may give US companies with foreign subsidiaries additional incentive to defer their effective date, but should not be taken as permission to delay their implementation date. “That would be a big mistake,” says Pearson. “Companies should still be preparing now for their implementation. Their delay should not be your delay.”
The effective date deferrals being proposed are the result of feedback from many corporations that original timing for the massive rule overhaul wasn’t enough to allow for the necessary changes to internal systems and procedures.