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The leading U.S. accounting professional group is gearing up to issue comprehensive, best-practices guidance by the end of 2017 to help companies and auditors follow new rules on revenue recognition that become effective next year.
“Here we are, it’s crunch time and we need to really make sure we’re in a position to give everybody what they really need in time” for the effective date of the revenue accounting standard, James Dolinar, chief of a financial reporting panel of the American Institute of CPAs, told Bloomberg BNA Jan. 18.
Revenue is widely considered the single-most important line in financial statements. Companies will have to get the reporting right to prevent a costly restatement and, in the case of public companies, avoid unwelcome scrutiny from securities regulators.
The Financial Accounting Standards Board in 2014 issued its far-reaching standard on revenue reporting (ASU 2014-09; ASC 606) that will affect virtually every commercial enterprise above the mom-and-pop level of management or ownership.
The International Accounting Standards Board issued like-worded rules at the same time.
The AICPA’s Financial Reporting Executive Committee, which Dolinar heads, oversees efforts to publish non-authoritative guidance for revenue reporting.
FASB and the staff of the Securities and Exchange Commission have suggested that the planned AICPA guidance will be important in helping companies make the judgments needed to apply the principles-based accounting standard.
Sixteen industry task forces have been working to identify transactions and revenue-generating contracts common to major commercial sectors.
The task forces are compiling illustrative examples to provide companies and auditors with accounting roadmaps that home in on commerce in such areas as aerospace and defense, telecommunications, health care, asset management, software, insurance, construction, casino gaming, and oil and gas.
As of Jan. 18, the AICPA’s special revenue recognition working group—which includes representatives from the eight largest accounting firms—has dealt with more than 75 percent of topics and potential accounting questions identified by the 16 industry task forces, said Kim Kushmerick, an AICPA senior technical manager and leader of the group’s revenue recognition team.
“We are pushing very hard” to get the remaining 25 percent of issues addressed by the AICPA’s revenue recognition working group by the end of March, Kushmerick told Bloomberg BNA.
AICPA issued on Jan. 4 the first edition of its on-line audit and accounting guide for revenue recognition. It offers general guidance on revenue reporting changes and specific how-to advice and financial reporting examples on asset management and aerospace and defense. AICPA expects to update the guide periodically.
The group plans to publish draft guidance on revenue reporting, with a focus on other sectors in its 16-item industry list, on the first day of each month in 2017, Kushmerick said.
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Information on the AICPA's work on revenue reporting, including updates on issues discussed by the 16 industry task forces, is available at http://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/RevenueRecognition.
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