AICPA to Issue Industry Specific Guide For Application of FASB Revenue Guidance

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By Denise Lugo

June 17 — The American Institute of CPAs is developing a single nonauthoritative revenue recognition guide to provide “helpful hints” and illustrative examples to aid high impact industries in their application of the recently issued revenue recognition standard, Susan Coffey, senior vice president, public practice and global alliances at the AICPA, announced June 17.

A single guide is slated for issuance mid-2016, but will be developed in 2015 with the goal of making the information available to AICPA members in “bits and pieces” to assist them in applying the standard, Coffey said during a meeting of the Financial Accounting Standards Board's advisory council.

FASB and the International Accounting Standards Board on May 28 issued the mostly converged global accounting standard, Revenue from Contracts with Customers, which is applicable for all industries and geographies (10 APPR 525, 6/6/14).

In the U.S., the guidance is effective for annual periods beginning after Dec. 15, 2016, including interim periods therein for public companies. It is applicable for nonpublic entities for annual periods beginning after Dec. 15, 2017, and interim and annual periods thereafter.

For companies using international financial reporting standards (IFRS), the standard is effective on or after Jan. 1, 2017, and allows early adoption.

Focused on 16 Industries

To develop the guide, the AICPA will meet over the summer with industry groups and experts to gather implementation issues, which will be referred to the FASB's joint revenue transition group (10 APPR 527, 6/6/14), and to the AICPA's Financial Reporting Executive Committee (FinRec), Coffey said.

FinRec will consider the raised issues to look for consistency and provide educational help among industries, she stated.

The practitioners gathered are preparers, auditors and industry professionals from 16 industries including aerospace and defense, airlines, broker dealers, construction contractors, depository institutions, gaming, healthcare, hospitality, insurance, investment companies, oil and gas, power and utilities, software, telecommunications and timeshare, Coffey said.

Preventing ‘Defacto’ GAAP

Coffey's announcement generated concerns about the potential fallout the development of this type of industry guide could create, and questions such as how the AICPA would incorporate and develop the issues so that they remain converged with international financial reporting standards.

Among concerns raised was the potential for the guide to become “defacto GAAP” and create industry confusion. “If I look back at revenue recognition for two decades, we've had lots of nonauthoritative guidance coming from firms; coming from multiple places that have become defacto GAAP and in fact even comment letters that preparers get from the SEC would reference some of those defacto pieces of ‘guidance,' ” said Prat Bhatt, senior vice president and corporate controller, chief accounting officer of Cisco Systems.

“So you mentioned the procedural point of 16 pieces of helpful hints and how it's going over to the implementation resource group—how do we prevent nonauthoritative GAAP from becoming defacto GAAP?” he asked.

“If I look back at revenue recognition for two decades, we've had lots of nonauthoritative guidance coming from firms; coming from multiple places that have become defacto GAAP and in fact even comment letters that preparers get from the SEC would reference some of those defacto pieces of ‘guidance.' ”Prat Bhatt, Cisco Systems

Coffey stated that the AICPA has a process in place so that FinRec is the control specifically for consistency purposes, whereby industry groups will funnel the implementation issues up to FinRec, as opposed to addressing the issues independently.

In recent years, the AICPA redesigned its guides to help practitioners think versus answer the questions for them, Coffey said. “So this is not going to be by any means a set of questions and answers, it's more the concept of teaching them how to fish and the right question to ask—more towards using their professional judgment in making a conclusion—so we're trying to prevent that defacto GAAP at least in these guides,” she said.

SEC Observing Process

The Securities and Exchange Commission will stay aware of the process. “We at the SEC expect to be observing the process at FinRec and other groups trying to make sure that we're focused on all of these various issues,” said Dan Murdock, deputy chief accountant in the office of the chief accountant.

Murdock said Bhatt's question could be pointing more broadly at the issue of guidance. “Because that Q&A is aimed both ways—there's a broader question there about implementation guidance that doesn't come from the FASB,” he said.

Also weighing in, FASB Chairman Russell Golden said the AICPA' s efforts would ensure that there isn't going to be the creation of industry specific accounting, since it will help align consistent application of the guidance through the system as a whole.

“As I understand it, there'll be educational information by industry, there's this control at FinRec and others to make sure that, ‘this is how the model works for gaming; this is how the model works for software,’ but it is educational material, it is not a change in information,” Golden said.

“I think we have a duty to educate people and people seem to work through industry and so the key is to give them the information they understand—but to align it across the system as a whole,” he said.

No Questions on Revenue Submitted to Date

In separate comments, made earlier at the meeting, FASB Vice Chairman James Kroeker said that to date the FASB's revenue recognition transition group has not yet received any specific implementation questions on the standard, but are aware of issues they can address at their first meeting set for July 18 (10 APPR 527, 6/6/14).

There was an issue that came up in one industry about an allocation method, said Kroeker, “but it would be helpful if people provide more specific issues,” which can bring the views in practice that are providing difficulty.

Another issue the transition group is aware of relates to “gross versus net” in the emerging space in e-commerce, Kroeker said.

The 19-member revenue transition resource group, a joint initiative of the FASB and the International Accounting Standards Board, was established June 3 to inform both boards about potential implementation issues that could arise when companies implement the new standard.

One of the objectives of the transition resource group is to educate and ensure consistency in application of the standard, comments made during FASAC discussions indicated. The transition resource group will be chaired by Kroeker.

To contact the reporter on this story: Denise Lugo in Norwalk, Conn., at

To contact the editor on this story: Laura Tieger-Salisbury at

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