Revenue recognition - New differences emerging
Revisions to clarify the standard to reduce diversity in practice
|Thursday, February 26, 2015|
By Ken Tysiac, Editorial Director, Journal of Accountancy
Except for a few minor differences, the revenue recognition standard released by FASB and the International Accounting Standards Board (IASB) in May 2014 contained converged financial reporting guidance.
But that handful of differences in the revisions that the boards plan to propose could move their guidance further apart. In response to implementation concerns from financial statement preparers, FASB and the IASB decided at a Feb. 18 meeting to propose revisions to clarify the standard to reduce diversity in practice.
A recap on FASB’s website of the tentative decisions made by the boards provides details on the changes the boards plan to propose. Both boards agreed that amendments to the guidance are needed to reduce the potential for diversity in practice. But, in general, FASB decided to propose more changes than the IASB did.
The clarifications the boards decided last week to propose dealt with two topics—licenses of intellectual property and identifying performance obligations. Here are areas where the boards differed, according to FASB’s recap:
Licenses of intellectual property
Although the boards agreed on many substantive clarifications to propose, FASB alone decided to propose further clarifications in the guidance:
Identifying performance obligations
The boards agreed to propose adding some illustrative examples to clarify how they intend the guidance on identifying performance obligations to be applied.
But FASB alone decided to propose further amendments to address implementation issues about:
FASB alone also decided to make certain technical corrections to the guidance on identifying performance obligations.
FASB instructed its staff to begin drafting a proposed Accounting Standards Update based on the tentative decisions reached for both licenses of intellectual property and identifying performance obligations.
The IASB decided to develop a single exposure draft of proposed clarifications to IFRS 15, which also will include any other clarifications the IASB deems necessary as a result of the discussions of the boards’ joint transition resource group in January and March. At its June meeting, the IASB expects to approve the clarifications that will be included in its exposure draft.
The boards also have demonstrated a difference of opinion on delaying the standard’s effective date. FASB is considering such a delay, particularly in light of the revisions that are proposed. IASB members have said their constituents have not voiced a need for a delay, but IASB member Patrick Finnegan said last week that a delay might be inevitable because of the revisions the boards are proposing.
A decision on the effective date could come as early as March.
Currently, the standard is scheduled to take effect for reporting periods beginning after Dec. 15,
2016, for U.S. public companies, or reporting periods beginning on or after Jan. 1, 2017, for companies that use IFRS.