Companies Shouldn’t Fear Embracing of Revenue Rules Early

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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.

TRG and the Revenue Standard

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.

Discussed Four Issues

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

To contact the editor responsible for this story: S. Ali Sartipzadeh at

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