The Financial Accounting Standards Board proposed a one year delay in enacting the new revenue recognition standards announced last year.
The governing board also agreed to allow early adoption in the proposal voted on Wednesday, according to the Wall Street Journal.
Once the proposal for a delay is officially issued by FASB, the public will have 30 days to provide comment. If enacted, the new rules would take effect in 2018 for public companies instead of 2017. Companies ready to adopt for the originally planned 2017 date could now do so, a significant offering by the board.
FASB staff recommended a two-year delay for public entities, but the board chose a shorter deferral. The board also agreed that privately held companies should be subject to a one-year delay, so new rules would be effective for them in 2019 instead of 2018. Along with the two-year delay considered, the board also weighed whether to require all companies to adopt retrospectively – meaning three years of historical financial data would be necessary. Ultimately, however, that avenue wasn’t pursued.
The IASB has yet to set any timeline on their own decision regarding a delay of the effective date for the newly converged standard. That governing body has stated there hasn’t been as much of a clamor for delay as the feedback received by FASB.
FASB board member Daryl Buck noted his initial skepticism over a delay in a Compliance Week report published Wednesday. He said after meeting with several companies recently, he changed his tune and came to support the two-year delay recommended by staff. Buck acknowledged the complex guidance is still being ironed out surrounding key issues, such as the licensing of intellectual property.
“The guidance is still in a state of flux,” said Buck. “It would be very difficult to expect them to comply with the existing effective date.”
The new recognition rules were announced last May with the goal of simplifying how companies record their revenue. The standard has been scheduled to take effect for reporting periods beginning after December 15, 2016, for US public companies. For companies that use IFRS, the effective date has been set to begin after January 1, 2017.
Since the announcement, many firms have lobbied for a delay to the start date for the new rules, noting the existing date wouldn’t allow enough time for the overhaul needed to change systems and procedures to start booking revenue under the new methods.