SEC Official: Changes to Revenue Rules' Wording Would Be Fair Reason for Delay

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By Steve Burkholder

Nov. 18 — If questions on how to apply new revenue rules point to a need for changes in wording in the standards, such a situation would weigh toward deferral of the standards, the Securities and Exchange Commission's chief accountant suggested.

“If the implementation issues are such that the two boards will have to go back and, let's say, revisit some of the wording that's in the standard, then I would think that would be a reasonable reason why they ought to defer the standard,” James Schnurr told reporters Nov. 18 at a conference of Financial Executives International.

Since late spring, a number of companies have urged the issuers of the standards—the Financial Accounting Standards Board and the International Accounting Standards Board—to defer the effective date of the six-month-old rules beyond their January 2017 scheduled timetable.

Companies have told FASB and IASB that the rules and their requirements for retrospective application are spurring them to get data on large numbers of customer contracts in order starting in the first quarter of 2015.

“Deferral certainly allows companies to go about the process of implementing it in a more organized fashion,” Schnurr said. “But just deferral would not necessarily solve at least what I understand are the implementation issues.”

OCA Tackling Revenue Questions

The Office of Chief Accountant is focusing its work on identifying and assessing various implementation questions on the revenue standards, he said. The aim of his office is to prepare for the most effective and efficient shift to the new rules so that U.S. investors will be served by high-quality reporting on revenue.

A joint FASB/IASB Transition Resource Group for Revenue Recognition has taken the lead in informing the boards on implementation issues that could arise when companies and groups apply the new standards. However, Schnurr earlier in November questioned whether the new group, called the TRG, will be able to carry out its mandate according to a timetable needed for a smooth shift to the revenue rules.

“There's no way they're going to be able to deal with these issues in a timely manner,” Schnurr said of the TRG on Nov. 6 at a Practising Law Institute conference in New York. He spoke of the need to accelerate the process for bringing implementation issues to the surface so that they can be addressed, as needed.

Many observers view revenue as the most important line in the financial statements. Over the years, dubious revenue recognition practices have gotten companies into hot water with the SEC's enforcement division.

At the brief Nov. 18 news conference, Schnurr reiterated a point he made earlier that day during a panel discussion at the annual FEI conference on current financial reporting issues.

“We're still in the process of getting our arms around what the questions are,” the SEC chief accountant said, referring to the implementation issues that are being identified by companies, auditors and others in the financial reporting community. “I don't know whether it's going to require the boards to do anything or not.”

Schnurr voiced his view that if the issues rose to the level at which an amendment of the standard were warranted, that situation would weigh in favor of deferral of the standard. “In my opinion, it would, yes,” he said.

In a slide used in his panel presentation, Schnurr identified a need for additional guidance on revenue recognition.

OCA Not Seeking to Avoid Deferral

At the news conference at the FEI gathering Nov. 18, Schnurr was asked if the Office of Chief Accountant was seeking to avoid a deferral of the recognition standards. Presumably, if standard setters decided on a deferral, the two boards would want to be aligned on that. Such IASB-FASB accord might require some time.

“The answer is no, I'm not seeking to avoid it,” Schnurr said, responding to a question from Bloomberg BNA. “What I'm focused on is that the standard be implemented in an efficient way—and that keeping in mind the focus is on ultimately the quality of the information that the investor is going to get as a result of implementing this standard.”

More Frequent TRG Meetings?

The chief accountant was asked by Bloomberg BNA if he is encouraging IASB and FASB to call for more frequent meetings of the TRG in 2015. In that way, the process of potentially devising and issuing any new guidance or interpretation deemed appropriate could perhaps be speeded up, per his suggestion.

“I haven't suggested that because I still think we're trying to find out what the issues are,” Schnurr told reporters.

“One possible outcome might be more frequent meetings” of the TRG, he said. He noted that FASB's Emerging Issues Task Force, a standing panel of auditors and other accountants working in various livelihoods, met monthly when it was set up.

The TRG has met twice since its formation in June. Its last meeting was Oct. 31.

The group meets next on Jan. 26. It is to meet four times in 2015.


Also at the FEI conference, Schnurr said that his office hopes to make recommendations to the commission “in the near term” on a possible course with regard to the future of the IASB-written international financial reporting standards in the U.S. public reporting regime.

“In terms of what direction we're going in, I'm not prepared to talk about that,” said Schnurr, a retired Deloitte & Touche national partner who started his job as SEC chief accountant in early October.

At his Nov. 6 conference appearance in New York, Schnurr said the range of recommended options on IFRS in the U.S. could include “doing nothing.”

To contact the reporter on this story: Steve Burkholder in New York at

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

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