Just because the Financial Accounting Standards Board (FASB) is considering a possible deferral for the new revenue recognition guidelines doesn’t mean your company should push the pause button on any ongoing implementation efforts. If anything, use this possible extension for what it represents, which, to use an aeronautical analogy, could be a longer runway from which to launch your firm’s implementation of this complex overhaul of the guidelines.
According to this recent article in Compliance Week, the board is considering a delay of the 2017 effective date of Accounting Standards Update No. 2014-09 in the wake of numerous requests for additional time, mere months after adoption of the new standard. Any such delay would be considered early next year following board outreach to a variety of companies attempting to adopt the standard, the article states.
The newly converged guidelines adopted by FASB and the International Accounting Standards Board (IASB) this past May involve a five-step process and an extensive set of new disclosures. Public companies are currently required to adopt the new standard for interim and annual periods beginning after Dec. 15, 2016, which equates to an effective date in early 2017 for calendar-year organizations.
FASB Vice-Chairman Jim Kroeker, who floated the idea of adoption deferral at a recent meeting of the governing group, suggested little sympathy would be given to companies that delay implementation effort as well as those seeking deferral without due process.
“If, as at least one board member fears, the majority of folks have not begun a process of adoption, that won’t be a good fact pattern in my mind in terms of saying a deferral is warranted.”
“If, as at least one board member fears, the majority of folks have not begun a process of adoption, that won’t be a good fact pattern in my mind in terms of saying a deferral is warranted,” Kroeker said in the Compliance Week article. Targeting those who are asking to defer before even beginning the process of adoption, he added, such companies should “get started so we can actually have data to understand what the application challenges are in transition.”
Kathy Pearson, Zuora RevPro, Director of Technical Accounting, agreed with such sentiment.
“Companies should move forward with their impact assessments and implementation plans,” she said. “They need to continue to work through the required process, system and data changes. The possible delay should be viewed as an opportunity to handle the change on a more proactive versus reactive basis and allow for more automation.”
Currently reviewing implementation issues brought forth as a result of the new standard, the FASB will weigh whether any action is warranted to ease implementation. Outreach results will be shared with the IASB to consider similar action.