SEC Not Expecting Perfect Initial Reporting Under Revenue Rule

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By Steve Burkholder

Top Securities and Exchange Commission accountants don’t expect to see perfect, first-time reporting of revenue when sweeping new standards take effect Jan. 1, 2018.

However, they will monitor closely any problematic areas that emerge from the Financial Accounting Standards Board revenue recognition rules, SEC Chief Accountant Wesley Bricker and Division of Corporation Finance Chief Accountant Mark Kronforst said Nov. 8.

Companies will hear from the SEC staff if it sees “red flags” warranting comment letters from the Division of Corporation Finance, Kronforst said.

“I don’t think you’re going to see us try to regulate registrant by registrant on revenue recognition,” Kronforst said at a Practising Law Institute conference in New York. “I don’t think you’ll be finding us making the comment process the news story.”

“I think we’re going to pay very close attention to red flags that we see and comments will go out if we see problems,” Kronfurst said.

FASB’s revenue standard—to be applied by many thousands of public companies—governs reporting on the accounting item widely deemed the most important single line in the income statements.

Many companies face big changes in their accounting, especially in the timing of revenue bookings.

Investors and security analysts focus on revenue as a major measure of performance. Revenue—especially the premature booking of it—has been a target of SEC enforcement for decades.

‘Learn over Time’

“Learn over time,” Bricker said, after agreeing with Kronforst, as he focused on the ample footnote disclosure requirements under the FASB standard, ASU 2014-09; ASC 606. “Take a look at the disclosures as they come out in the 2018 period and learn over time.”

The SEC staff encourages companies to use “practical judgment” and a “fresh perspective” on revenue-generating contracts in carrying out accounting prescriptions for recording and making disclosures about revenue, Bricker said.

A backdrop for the comments by the top SEC accountants is many companies’ apparent lack of full readiness to apply the revenue rules.

However, a large number of companies have made significant progress this past year in preparing for the Jan. 1 effective date, Big Four firm specialists in revenue reporting have told Bloomberg Tax.

To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at

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

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