The Financial Accounting Standards Board has decided it will give preparers, auditors, and users of financial statements another chance to review and comment on a new standard for revenue recognition.

After it issued a sweeping proposal last summer in tandem with the International Accounting Standards Board to overhaul revenue recognition, the FASB and IASB received nearly 1,000 comment letters providing feedback. The two boards have met numerous times since January to discuss how they should revise their proposal based on that feedback, and they have reached dozens of conclusions about how their proposal should be rewritten. With that amount of activity on a standard so critical to capital market activity, the boards have decided they'll republish their revised proposal for another round of comment and revision.

In a summary of the changes the boards have decided to make, the boards explain their new conclusions about how companies should identify a contract with a customer, how they should identify the separate performance obligations in the contract, how they should determine the transaction price associated with those obligations, how they must allocate the transaction price the various performance obligations, and how they should recognize revenue when the entity satisfies each performance obligation. The revised proposal also will make changes to the accounting for warranties, breakage, onerous obligations, licensing and rights to use, sale-and-repurchase transactions, costs tied to obtaining a contract, and costs of fulfilling the contract.

“Given the prominent role of revenue in financial statement analysis, the boards decided that it would be appropriate to re-expose the proposed standard, and afford our stakeholders the opportunity to review the changes in context,” said FASB Chairman Leslie Seidman in a statement. The boards plan to publish their revised proposal during the third quarter and allow 120 days for comments.

That virtually assures the boards will take all the additional time they have given themselves – and likely more – to complete the revenue recognition standard, one of three key priority projects for the FASB as it seeks convergence of U.S. accounting rules with International Financial Reporting Standards. The boards originally targeted this month for completing the revenue recognition project, along with new standards on financial instruments and leasing. The IASB also put a new standard for insurance contracts on its priority list.

More recently, however, the boards have indicated they'll take at least through the end of 2011 to complete those highest priority convergence projects. FASB staff members have estimated the final standard could be issued in September 2012.

The boards indicated there's no formal requirement for them to republish the proposal, but they believed it appropriate because of how significant the standard is to reaching a revenue number. “It is important that we get this right, first time,” said IASB Chairman David Tweedie in the joint statement. “We are keen to treble-check that our conclusions are robust and can be implemented with minimal disruption.”

Ernst & Young said in a notice to clients that it supported the decision to re-expose the revised proposal for another round of comments. “During their redeliberations over the past six months, the boards have been very responsive to input from constituents and as a result have significantly changed a number of aspects of the model,” the firm said. “We believe constituents need an opportunity to re-evaluate the model as a whole and to provide the Boards with feedback.”