The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
Oct. 19 — Media and entertainment companies, credit card processing enterprises, and other companies won’t have to disclose certain revenue amounts stemming from backlogs deemed to be in “the pipeline,” under U.S. accounting rulemakers’ decisions to amend far-reaching revenue rules.
Footnote reporting on such amounts from certain “remaining performance obligations”--including on royalties from licenses of intellectual property--won’t be required, as they would have been in the version of the revenue recognition standard the Financial Accounting Standards Board issued more than two years ago (ASU 2014-09).
The board also added an effective exception from such quantitative disclosures for series of regular transactions, such as those reported by companies that process transactions using Visa, MasterCard, and American Express cards.
However, companies still will have to describe the nature and duration of remaining performance obligations, as well as provide other qualitative disclosures on any backlogs of revenue-generating contracts.
A divided FASB made those decisions as it advanced a small set of “technical corrections and improvements” to the revenue standard. The revenue standard was issued jointly with the International Accounting Standards Board in May 2014. Many thousands of companies worldwide will have to shift to the new rules in January 2018. Companies can choose to adopt the new standards a year earlier.
FASB plans to issue the limited-scope guidance containing the corrections and improvements by Dec. 31.
A key motivation for the board’s shift away from the 2014 rules’ wider prescriptions on quantitative disclosures of remaining performance obligations is linking disclosures with recognition and measurement under the standard.
If enterprises don’t have to estimate amounts stemming from such obligations, then they shouldn’t have to disclose those amounts in footnotes to the financial statements, FASB reasoned.
When the revenue rules were issued, FASB Chairman Russell Golden described benefits from the disclosures that allows investors to better understand “the pipeline to revenue,” what is commonly called “backlog.”
FASB members Marc Siegel and Harold Schroeder plan to dissent to the issuance of the planned guidance embodying corrections and improvements. They disagree with other board members on the backlog disclosure issue. Siegel and Schroeder spoke of the quantitative disclosures being valuable to investors and, as Schroeder put it, filling a large hole in the financial statements.
Other board members, such as James Kroeker and Lawrence Smith, cautioned against opening up disclosure issues that would delay the long-awaited application of the important revenue recognition standards.
To contact the reporter on this story: Steve Burkholder at email@example.com
To contact the editor responsible for this story: S. Ali Sartipzadeh at firstname.lastname@example.org
A FASB meeting handout on the revenue recognition issues discussed Oct. 19 is available at: http://www.fasb.org/jsp/FASB/Document_C/DocumentPage&cid=1176168536969. The board will soon post a summary of tentative decisions made at the meeting at: http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1351027222464.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)