Update Aug. 12, 2015: The one-year deferral voted on last month by the Financial Accounting Standards Board was made official this week.
Update July 22, 2015: The International Accounting Standards Board (IASB) on Wednesday approved their one-year deferral for the effective date of the new revenue recognition standard to remain in alignment with the Financial Standards Accounting Board (FASB) timeline.
The move to grant an extra year of preparation for companies grappling with the sweeping changes in revenue recognition rules was made official. Almost.
The Financial Accounting Standards Board (FASB) agreed on Thursday to push out the effective date of its overhauled rules to 2018 for public companies, instead of 2017 as initially scheduled. In addition, companies prepared to adopt the new rules in 2017 will be able to do so under the original date.
Thursday’s decision, reported in the Wall Street Journal and other sources, followed the board’s proposal for the delay in April. The decision was made after reviewing the dozens of comment letters, all of which supported the delay proposal. Several companies sought a further delay of two years.
Kathy Pearson, Leeyo’s Director of Technical Accounting, said she was pleased to see the FASB realize the need for an extra year to adopt the new standard, but stressed that companies should not view this as a reason to slow down on their implementation projects.
“To put it in perspective,” said Pearson, “for calendar-year-end companies looking at doing the full retrospective transition approach, the starting point for reviewing all open contracts is only five months away.”
A CFO.com article published in the wake of the FASB decision provides a laundry list of key issues companies need to sort out, highlighting why the date deferral shouldn’t equate to an implementation deferral. Pressing items companies must sort out now include the determination of processes and controls necessary for the new principles-based approach and the effects of the new standard’s five-step approach on existing contracts, disclosures, pricing and their bottom line.
The vote this week decided the question of the delay in principle, to be followed by a final written rule prepared by staffers, in which the delay will be formalized with one final official vote.
On Monday, July 13, the FASB/IASB Joint Transition Resource Group for Revenue Recognition will meet to discuss a number of specific issues related to the new guidance. Stay tuned for further updates here.