FASB Staff Member Says Cost, Retrospective Application Concerns Delayed Revenue Rules

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By Steven Marcy
April 2 — The Financial Accounting Standards Board proposed a one-year extension of the revenue-recognition date because of its potential for containing transition costs and because many practitioners said the delay would provide more time to fully apply the new rules retrospectively to their earlier financial statements, a FASB staff accountant told a PwC webcast.
FASB voted 4-3 April 1 to propose allowing public companies to implement the revenue rules for annual periods beginning after Dec. 15, 2017, and for nonpublic companies to apply them to annual periods beginning after Dec. 15, 2018. Companies could still adopt the guidance at the original Jan. 1, 2017, effective date if they wish (see related story).
Accommodating Cost, Retrospective Application

A “couple of the common” reasons for wanting a delay were that it “would allow implementation costs to be reduced” and that “a lot of organizations seemed to have a preference, or at least a goal, for a full retrospective transition approach, and they thought that an additional year would afford them the opportunity to do that,” Cullen Walsh, FASB assistant director of researcher and a manager of the revenue-recognition Resource Transition Group, told the April 1 webcast.
FASB and the International Accounting Standards Board issued a converged revenue-recognition standard in May 2014 (10 APPR 525, 6/6/14). Unknown is whether IASB will follow suit in granting an implementation delay. An IASB spokesperson told Bloomberg BNA April 1 that the board probably will consider the issue at a late-April meeting.
IASB Concurrence on Delay Vital
A FASB deferral without a matching move by IASB would cause problems, PwC webcast participants said.
A decision by IASB not to grant a delay could undermine the entire benefit of a deferral, especially for those companies that must prepare their statements under international financial reporting standards, said Gregg Nelson, IBM vice president for accounting and financial reporting.

The impact of the deferral “will ultimately depend on the boards staying converged on the effective date,” Nelson said. “If the FASB goes ahead with the delay and IASB does not, companies could lose the benefit of the deferral if they have to file statutory statements on an earlier date under IFRS.”
Attempts to Deflect Threat to Convergence
Walsh, who said he was speaking for himself and not for FASB, deflected questions to the webcast that the FASB deferral and slight differences between the boards in practice that each allow indicate that convergence on the revenue standard is unraveling.
“I do think it's important that folks realize that under no circumstance has the FASB or the IASB has thrown in the towel on convergence,” Walsh said. “When some of these decisions have been made to go in slightly different directions, there has been careful consideration of the convergence angle, and a lot of debate about what this would do to convergence.” He added that the differences allowed so far in some areas of revenue recognition practice “should not result in significantly different financial reporting outcomes.”

“For those of you who are worried that a decade-long project was for nought, I can assure you that convergence is at the forefront of everyone's mind at the FASB and the IASB,” Walsh said.
Many of the practice differences FASB has granted have occurred in what the board calls “practical expedients.” They include such areas as contract modifications (11 APPR 304, 3/27/15) at the transition point to the new standards, ignoring “immaterial promises,” accounting for shipping and handling, and presentation of sales taxes, Walsh said.
Don't Slacken Preparation
Nelson and other webcast participants said the deferral will not slacken their efforts to install the rules, and they urged others to continue a vigorous push towards implementation. While easing the pressure to implement the standard is very welcome, “this is not an opportunity to put the pencils down,” said PwC partner Dusty Stallings.
Nelson said that continuing a strong pace towards implementation will provide “flexibility” and an understanding how they work, making it easier to adjust practices if other parts of the standard should also change before the effective dates.