The Financial Accounting Standards Board and the International Accounting Standards Board said Friday they plan to create a joint group to help companies and their accountants make the transition to the upcoming final converged standard on revenue recognition.
The transition group will be responsible for informing FASB and the IASB about interpretive issues that might arise when companies, institutions and other organizations implement the revenue recognition standard. The group will solicit stakeholders, as well as analyze and discuss the issues that apply to common transactions that could reasonably create diversity in practice.
FASB chairman Russell Golden said he thinks the revenue recognition standard will be completed this year. “We are today announcing a revenue transition resource group jointly with the IASB, which I think is an important step forward to show and facilitate the opportunity for people to understand what was the boards’ intention in putting out a new standard,” Golden said in a meeting at the Accounting Today offices on Friday (see New FASB Chairman Makes Plans for Future Accounting Standards). “We are there to help people resolve any diversity you may have between companies, or between companies and auditors and regulators, and to make improvements that eventually would be necessary after a standard goes effective.”
In addition to providing a forum to discuss the application of the requirements, the group will provide information that will help FASB and the IASB determine what, if any, action will be needed to resolve that diversity. The group itself will not issue guidance.
The transition group will consist of 10 to 15 specialists representing financial statement preparers, auditors, regulators, users and other stakeholders as well as members of FASB and the IASB. The members will be announced shortly after the final standard is issued. Prospective members can apply to the two boards for membership.
The resource group will convene once the revenue recognition standard is issued later this year. The group is expected to meet for a limited amount of time, and its primary activities will likely occur before the revenue recognition standard takes effect in 2017.
FASB and the IASB may organize other transition groups to help ease the way for accountants as other converged standards in their memorandum of understanding, such as leasing and financial instruments, eventually are finalized.
“I hope to learn from this to see if we need to do additional transition groups as these additional MoU projects are completed,” said Golden. “The goal would be that this transition group would cease prior to the effective date so that companies would understand what is expected of them during the period between when the boards issue a final document and it actually becomes effective.”
A final converged standard on revenue recognition had been due out this summer from the two boards, but Golden acknowledged that they still have another joint meeting scheduled before issuing the standard, which is now expected to be out before the end of the year. Another factor is that the IASB will on recess for the month of August.
“Revenue is a key performance indicator and is important to every business,” said IASB chairman Hans Hoogervorst in a statement. “Our joint transition group will help to ensure that stakeholders are reading the words in the new revenue standard in the way that we intend that they be read.”
Stakeholders will be encouraged to submit implementation issues to the transition group. Submissions that meet the boards’ minimum guidelines—such as broad applicability, the potential for the new revenue recognition standards to create diversity in practice, and how to move away from industry-specific guidance to guidance across multiple industries—will be presented by IASB and FASB staff at public transition group meetings. Guidelines for submitting issues will be posted to the boards’ respective Web sites after issuance of the final standard.