The Latest in the Changing Landscape of Revenue Recognition
by Timothy Brown of MFA – Moody, Famiglietti & Andronico
As most are aware by now, the FASB and IASB (“the Boards”) published their joint revenue recognition standard in final form through the issuance of ASU 2014-09, Revenue from Contracts with Customers in May. I first did what I imagine most would; quickly flipped to the implementation section to determine when this new standard would be effective. PHEW! A first glance essentially shows the effective dates are calendar year 2017 for public entities and 2018 for private entities. Sure, private companies may elect at their option to go a year early, but we’re still years away! Some additional reading quickly indicated to me that there was more to it than that…
So when is this effective?
The new revenue recognition standard must be implemented retrospectively, which means that the December 15, 2016 (public company) and December 15, 2017 (private company) implementation dates are not as far off as they may seem. For public companies presenting three years of income statement information, this new standard is effective in just weeks on January 1, 2015! Also include time for items such as: 1) internal controls changes; 2) new IT system upgrades or implementations; 3) considering conforming accounting changes; and 4) considering how contracts and agreements are impacted. With these additional considerations, suddenly the dates for implementation don’t look nearly as reasonable any longer.
Perhaps this new revenue recognition standard doesn’t impact me?
Think again. This standard affects all entities that recognize revenue. It crosses service lines, industries and even countries. The converged standard establishes a global model for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance, as well as companies following IFRS. Even pre-revenue entities with plans to recognize revenue by 2017 or 2018 will be impacted. For additional detail on the new model and answers to frequently asked questions, download MFA’s White Paper on the topic, Revenue From Contracts With Customers.
The latest from the marketplace
The FASB has received several requests to delay the effective dates of the new Revenue Recognition standard. Tempting as it may be to pause adoption efforts, it is essential to stay the course for implementation. Reports from FASB Vice-Chairman Jim Kroeker via the most recent meeting of the FASB and IASB’s Joint Transition Resource Group say that they are assessing deferral of the 2017 effective date of the standard due to the number of requests that they have received on the topic. The FASB anticipates that a decision will be made by no later than the second quarter of 2015 regarding the possible modification of the final effective dates. At the recent AICPA Conference in Washington, DC, the recommendation of the revenue panel was to continue to work through and not around the new standard regardless of the effective date discussion.
Moving toward implementation
Gaining an understanding of when and how you will be impacted is critically important, as is having an understanding of the core concepts. Join me on January 27, 2015 at Fratello’s in Manchester, NH for a FMA NH and IMA technical meeting that will shed more light on the topic. Click here to register for the upcoming event.
Can’t make the upcoming technical session? MFA has created an “Information Hub” as a central resource to gather up-to-date, strategic information regarding this significant accounting change in revenue recognition. Also, please feel free to reach out to me directly at (978) 569-2948 or via email with any questions you might have.
About the Author
Timothy Brown, CPA is a Partner at Moody, Famiglietti & Andronico (MFA) and will be one of the speakers at our January 27th event