Governing boards overseeing the newly converged revenue recognition standard are still weighing decisions regarding a potential deferral in the effective date of the standard, with FASB set to hold further discussions this Wednesday, April 1.
Let’s hope that’s not an April Fool’s Day ruse.
The standard is currently scheduled to take effect for reporting periods beginning after December 15, 2016, for US public companies. For companies that use IFRS, the effective date begins after January 1, 2017.
Soon after the new rules were announced in May of last year, questions began to arise whether the effective date gave companies enough time to make their transition to the new revenue recognition standards.
Companies choosing a full retrospective transition would need to start capturing data by January 1, 2015, to demonstrate comparability. Clearly, dates as part of the status quo are approaching fast and furious.
“We believe both preparers and users of financials will benefit from an extension of the effective date and greater utilization of the full retrospective method of implementation,” Paul Stephens, Senior Vice President and Controller of AT&T, wrote to FASB, as noted in a recent Journal of Accountancy report. He added that timing of the release of the standard, coupled with the length of the company’s contract with customers, would make it difficult to provide the required information.
Based on the multitude of feedback of this nature, FASB and its staff have been researching possible deferral of the effective date. The other governing entity, IASB, has said it has not received as much feedback from constituents seeking a deferral.
During the joint meeting held collectively by the boards last month, IASB member Patrick Finnegan predicted a delay.
“If a company was going to apply this standard and restate three years and try to be ready … they’d have to know the answers to these questions on [Jan. 1, 2015],” Finnegan said. “And they’re not going to know the answers. So it’s pretty obvious that there’s going to have to be a deferral in light of all these potential changes we’re talking about.”
The IASB is expected to hold discussions soon on a possible deferral of the effective date.