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Vote Scheduled to Delay Revenue Standard’s Effective Date

After several complaints from U.S. companies that they needed more time to comply with the new revenue recognition standard, the FASB is scheduled to vote on a delay. The IASB has heard fewer complaints from overseas businesses but plans to discuss the issue in late April.

The FASB on April 1, 2015, is scheduled to discuss the controversial effective date of the landmark revenue recognition standard.

Public companies don’t have to apply the changes until their first-quarter 2017 financial statements, but many U.S. businesses have complained to the FASB that they don’t have enough time to implement the sweeping new rules.

A few companies have told the FASB they’d prefer that the 2017 effective date remain because of the substantial investment they’ve made to this point in updating their reporting systems.

The delay is sought because companies that want to present three years of comparable revenue figures when the standard goes live need to have implemented on January 1 the changes to their financial reporting systems. This transition method, called “retrospective” application, isn’t required under the new standard, but many U.S. companies expect to follow it because investors will want to make clear comparisons of revenue from year to year.

Many companies have called on the FASB for an extra year to comply with the accounting standard, which was published in May 2014 via the FASB’s Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. It is largely converged with the IASB’s IFRS 15, Revenue from Contracts with Customers.

In addition, the FASB has also felt the heat from SEC Chief Accountant James Schnurr, who made several public statements that a delay might be needed.

At a December meeting of the FASB’s Financial Accounting Standards Advisory Council, Schnurr called a deferral of the 2017 effective date a “logical”┬ámove.

“I have expressed some concern about the pace of implementation, particularly given the effective date, and for those companies that desire to use the retrospective application method, they ideally would need to have all their processes in place by January 1,” Schnurr said at the time. “That’s probably not going to happen.”

Schnurr continues to support a delay, a SEC spokeswoman said.

The IASB has heard fewer requests for a delay but plans to meet later in April to discuss the issue, a spokeswoman said.

The revenue standards erase about 180 pieces of individual, industry-specific revenue guidance in U.S. GAAP and provide a single, principles-based process by which all businesses must calculate the top line in their income statements.

The standards are the culmination of a dozen years of work and are expected to usher in major changes for reporting revenue, the top line in company income statements. Revenue is generally treated as one of the most important measurements of a company’s financial performance.

In addition to the effective date, the FASB at its April 1 meeting also plans to discuss its proposal to clarify two aspects of the standard that have raised questions. The board plans to discuss how to identify separate performance obligations in a customer contract and the accounting for licenses. The board is scheduled to vote on whether to release for public comment a narrow proposal to clarify the issues, according to a preliminary agenda.

The board also is scheduled to discuss its project on improving the statement of cash flows.

Separately, the FASB plans to meet with the National Association of College and University Business Officers on March 31. The board and the association typically discuss FASB accounting projects that affect colleges and universities.

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