The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving, and complex accounting issues. Expert News & Commentary.
By Denise Lugo
Nov. 7 — Companies that adopt the revenue recognition accounting rule in 2017—a year earlier than required—shouldn’t worry about subsequent Financial Accounting Standards Board’s transition resource group (TRG) discussions and decisions, FASB Vice Chairman James Kroeker said.
Early embracers of the rules can confidently move ahead with any reasoned and thoughtful position they’ve come to in accordance with the new revenue rules, Kroeker said. Unless the board takes on a project to amend the standard, “the standard is the standard”, he said.
Some companies contemplating early adoption—like ones in the aerospace and defense sectors—have worried such action would have unintended repercussions if the TRG next year comes out with a views that differ from what these companies and their auditors have adopted, according to Nov. 7 discussions.
The TRG, the panel that discusses new issues that arise as companies plan and prepare to adopt the rules, doesn’t provide rules for firms to apply. Its discussions are intended to be illuminating, in some cases, and in others to make recommendations that FASB provide further clarifications if the discussions reflect that need.
The new standard, Revenue from Contracts with Customers, ASC Topic 606, goes into effect 2018, but can be adopted next year. The accounting standard was issued in 2014 to replace dozens of industry-specific rules with a principles-based model for recognizing revenue globally. The new, far-reaching global revenue standard could result in a change in earnings for some firms.
The Nov. 7 discussions didn’t result in any standard-setting recommendations to FASB. The panel provided insights around four issues:
• capitalization and amortization of incremental costs of obtaining a contract: recognizing and measuring incremental costs of obtaining a contract as an asset and estimating the period of amortization;
• sales-based or usage-based royalty with minimum guarantee: determining how to account for a sales-based or usage-based royalty promised in exchange for a license of intellectual property that includes a minimum guarantee amount;
• payments to customers: the timing of recognition of the payments in the income statement;
• over time revenue recognition: considering “over time” revenue recognition under the new standard – the topic relates to how control transfers when a performance obligation is satisfied over time.
To contact the reporter on this story: Denise Lugo in New York at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Copyright © 2016 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)