FASB Pushes Revenue Recognition Release to Late May

Companies waiting for the final standard on revenue recognition will have a few more weeks to wait as the Financial Accounting Standards Board now expects to release it in late May.

The standard most recently was expected in the first quarter of 2014. FASB's website now indicates the standard is expected to be issued in the second quarter of 2014, which gives the board until the end of June. “The delay stems from the fact that many sections of our codification need to be updated as a result of the new standard,” says FASB spokesman Chris Klimek. “It's also the longest standard we've ever issued. The delay is entirely the result of the amount of production time needed.”

FASB and IASB have long since completed deliberations and made final decisions on the requirements of the standard itself. The boards made final decisions in late 2013 on issues such as variable consideration, licenses, and collectibility, some of the most difficult aspects of the joint proposal issued by FASB and IASB in November 2011.

The two boards worked together for more than a decade to develop a standard to replace hundreds of historical pronouncements in U.S. Generally Accepted Accounting Standards and scant guidance in International Financial Reporting Standards. It represents their largest and most successful convergence project, with companies awaiting the final guidance so they can begin implementation. The standard is expected to take effect for U.S. public companies in January 2017.

The standard will focus companies on assessing their contracts with customers, determining when they have fulfilled their obligations under contracts, and recognizing revenue accordingly. Experts in revenue recognition say the new guidance will be expected to enable U.S. companies to recognize revenue sooner than they typically do under existing accounting standards. While the new standards provide a great deal more guidance to companies following IFRS, it streamlines the guidance for U.S. companies by doing away with dozens of rules written for specific industry sectors.