Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

Revenue Standard May Not Be Published Until Second Quarter

January 28, 2014

The FASB and IASB have encountered several delays in trying to publish the final version of their converged standard for revenue recognition. In recent months, the boards said they planned to release the standard in the first quarter of 2014, but the FASB’s most recent comments point to a second-quarter publication date.

The FASB and IASB’s landmark accounting standard on revenue recognition may not be published in the first three months of 2014, as the boards have previously said.

The FASB’s most recent timing announcement, published in a new “FASB Outlook” newsletter, puts the standard on track for release in the first half of the year.

The apparent delay is being attributed to the sheer size of the document, a FASB spokeswoman said. Proposed Accounting Standards Update (ASU) No. 2011-230, Revenue from Contracts with Customers, was more than 400 pages, and the board has to comb through more than 180 pieces of industry-specific, individual revenue standards in U.S. GAAP and replace them with revised requirements. The IASB must translate the new standard into several languages.

The spokeswoman said the potentially later publication date is not related to the reevaluation of the board’s earlier decisions or problems with writing the standard.

The IASB, however, still considers the project on track for publication by March 31, a spokesman for the international board said.

The IASB plans to publish the standard at the same time as its U.S. counterpart, he said.

The FASB and IASB’s revenue recognition project is expected to usher in a significant change in accounting for what is often considered the most important line in the financial statement. The boards want to get rid of the reams of industry-specific revenue guidance in U.S. GAAP, strengthen the principles in IFRS, and come up with a single way for all companies to report revenue, making it easier for analysts to understand and compare the results of different types of businesses.

The draft standard stems from the release in November 2011 of largely converged proposals, the FASB’s Proposed ASU No. 2011-230 and the IASB’s Exposure Draft (ED) No. 2011-6, Revenue from Contracts with Customers.

The crux of the draft standard is that businesses will report revenue in the amount they expect to receive. Businesses will follow five steps to determine the amount of revenue they recognize. Companies will identify the contract with the customer, identify the separate obligations embedded in the contract, determine the transaction price, break down the price by each contractual requirement, and recognize revenue as the contract’s requirements are satisfied.

At a conference in New York in November, IASB Chairman Hans Hoogervorst hailed the project as the “crown jewel of convergence.”

The boards in 2013 said the final standard would be published by June, then pushed the timeline to the end of the summer. By August, the boards said last-minute questions cropped up, and the new accounting standard would come out by the end of the year. In November, the FASB and IASB settled what were expected to be the last of the lingering questions and scheduled publication for early 2014.