NEW YORK—The Financial Accounting Standards Board and the International Accounting Standards Board in March completed their joint deliberations on the revenue recognition project. The boards are expected meet in April to address any issues that arise either out of the drafting process or of a more specific nature. Additionally, there is expected to be one more meeting subject to the comments that come out of a fatal flaw revenue as well as board members own review of the draft.
At this point their plan is to issue a final standard on revenue recognition in the second quarter.

In light of these developments, Bloomberg BNA will be holding a webinar April 25, titled: New Accounting Guidance for Revenue: Big Change on the Horizon, from 12:30 to 1:30 p.m. It avails 1 CPE credit. Speakers: Peter Bible, Chief Risk Officer at EisnerAmper LLP; Mark Crowley, Director, Deloitte & Touche LLP; and Kevyn Dillow, VP, Senior Accounting Analyst, Moody’s Enhanced Analytics Group. They will discuss a number of issues related to the standard, including transitioning the new rules. 

Transition is one of the most controversial topics the boards identified in the comment process because there is a strong desire by investors to have some sort of trend information, which is most effectively accomplished through retrospective application. But on the other hand that is by far the most costly approach to transitioning to a new standard, especially something like revenue recognition, which affects every company---and furthermore, some of the contracts are very long in terms of their duration.
After a series of roundtable meetings that both boards held with stakeholders, they were presented with several alternatives and decided on a modified retrospective approach to transition.
The basics of it is that in the period of adoption, an entity would record a cumulative effect for only contracts that exist as of that date. That’s an important distinction from retrospective transition where the entity would have to go back and restate transactions that have already been completed and reported in prior periods.

The boards are saying: just deal with what exists as of the transition date, FASB Chairman Leslie Seidman said during a meeting of the FASB’s advisory council. There would be no requirement to restate to the prior periods presented but to be responsive to users’ desire for trend information the boards will require that in the year of adoption that the entity provide a disclosure of the current transactions using the old method, said Seidman. Thus, the entity would be able to compare the current reporting period with the results that would have been reported under the previous approach.
Effective Date.

In terms of the effective date, the new standard would be effective for reporting periods beginning after Dec. 15, 2016 both annual and interim periods. So, for a calendar year company, the first period which it would report this if it is a public company would be March 31, 2017.
The boards decided to prohibit early application, said Seidman, “because we’re talking about revenue and we just think it would be confusing for companies to adopt the change in different periods, so we’re requiring that everybody apply it as of the same quarter but with special consideration for nonpublic entities.”

Seidman stated that the boards did agree on the same transition approach, i.e. that modified retro, but agreed to a one year deferral of the effective date, “so that for a nonpublic entity, they would be allowed to apply the new requirements for annual reporting periods beginning after Dec. 15, 2017 and interim periods thereafter.” This represents a deferral of one annual period and two years for interim periods.

The webinar, moderated by yours truly, will review the main provisions of the standard and will address a number of other issues such as
• Disclosure-related issues and other areas of interest to analysts
• What companies should expect once all of the industry-specific guidance is eliminated
• Other knock-on impacts on business operations such as mergers and acquisitions, IPOs
• Industries expected to be most impacted
• Best approach toward avoiding landmines stemming from trying to adopt a new standard
• What companies should be doing now
• Other general insights on how to stay informed
In the meantime, if there are any other issues you’d like to hear the panelist opine on feel free to email us

by Bloomberg BNA Staff Correspondent Denise Lugo, 

dlugo@bna.com