FASB Flash Report - April 2015
FASB Votes to Defer Revenue Standard by One Year
Earlier today, the FASB decided to propose a one-year delay of the effective date for the new revenue recognition standard that it issued jointly with the IASB in 2014. If the proposal is finalized, the revenue recognition standard would take effect in 2018 for calendar year-end public entities. It would take effect for private entities in 2019. The proposal is expected to be released soon with a 30 day comment period.
The FASB’s decision to propose a deferral results from a number of requests to defer the effective date of the new revenue standard.1 However, the Board also received feedback from some entities that do not think a deferral is necessary. As a result, the proposal will include an option for public and private entities to early adopt using the original effective dates, which is designed to provide flexibility for different companies in various stages of their implementation efforts. The IASB has not yet indicated whether it will propose a similar extension of the effective dates in IFRS 15, the companion to the new revenue standard in U.S. GAAP.
Specifically, the deferral would require public entities to apply the new revenue standard for annual reporting periods beginning after December 15, 2017 (i.e., January 1, 2018 for a calendar year entity), including interim reporting periods therein. Public entities would be permitted to elect to early adopt for annual reporting periods beginning after December 15, 2016.
Private entities would apply the new revenue standard for annual reporting periods beginning after December 15, 2018 (i.e., January 1, 2019 for a calendar year entity) and interim reporting periods within annual reporting periods beginning after December 15, 2019 (i.e., the quarter ending March 31, 2020 for a calendar year entity). A nonpublic entity may elect to early adopt for annual reporting periods beginning after December 15, 2016, including interim reporting periods therein.
On the Horizon
The joint FASB/IASB Transition Resource Group has held a number of meetings to discuss revenue recognition implementation issues. As a result, the Boards have decided certain changes are needed to make the new revenue standard more operational and are planning to propose amendments to that effect, which will also be exposed for public comment. Additional changes in connection with future TRG deliberations are also possible. Therefore, stakeholders should monitor these developments during their implementation efforts.
For questions related to matters discussed above, please contact Adam Brown, Kenneth Gee or Chris Smith.
1 ASU 2014-09 Revenue from Contracts with Customers