Accountants are getting ready to implement the new revenue recognition standard, even though a one-year delay on the date it takes effect seems all but certain.

Financial Executives International hosted a conference late last month on the upcoming standard to examine how companies are preparing for implementation. In April, the Financial Accounting Standards Board voted to propose allowing the standard to take effect for public companies for reporting periods beginning after Dec. 15, 2017, as opposed to the original date of Dec. 15, 2016, with earlier adoption permitted. The International Accounting Standard Board has proposed a similar delay in the standard, which was issued last year after more than a decade of convergence work by FASB and the IASB.

Steve Hobbs, managing director of the consulting and internal audit firm Protoviti, led a panel discussion at the conference in New York.

“It’s very easy to get overwhelmed by this new standard and what it might mean,” he said. “I thought the conference did a pretty good job of talking about some practicalities and some good ideas about how to approach this issue. You may not like the new standard and all of the new requirements, but if you’re going to have to do it, what are some practical ways of going about it?”

Speakers at the conference offered advice on where to start, what to plan, who should get involved, some of the common pitfalls to watch out for, and best practices for moving forward as companies deal with the transition.

Most of the accountants Hobbs has talked to seem relieved that FASB and the IASB are likely to delay the effective date of the standard for another year.

“I think the general sense that I got in that conference and other events, and with clients and prospects, etc., is that most everyone is pleased to have the additional year,” he said. “But we caution them not to take your foot off the pedal. We believe companies are going to need that additional year. The more that companies look at the potential ramifications of this new standard on their reporting, business, back office and infrastructure, the more they realize this could be bigger and more significant than they thought. I think most everyone at least is grateful for the additional year, and for those companies that didn’t want the additional year, there’s provision for them to adopt early, which would be under the original timing. If they want to be a mover and shaker and be on the front edge of this, they’ll have that opportunity, if the revised standard as it’s been proposed gets finalized. They can do it under the original timeline should they so desire.”

Some of the speakers are on FASB and the IASB’s joint Transition Resource Group, which is helping the two standard-setting boards come up with guidance on implementing the new standard while identifying issues that need further clarification in a recent proposal.

“It adds some specific issues around performance obligations and licensing issues, so we’re starting to see some issues coming out of that TRG, although as you know that group is not authoritative,” said Hobbs. “What that group tries to do is surface some of the clarifying issues and guidance that companies might need as they deal with the adoption and implementation of the new standard. Then it’s up to the FASB and the IASB to make any corrections on the authoritative literature.”

Hobbs pointed out that the extra guidance is needed because the converged standard is principles-based, like the IASB’s International Financial Reporting Standards, as opposed to FASB’s traditional rules-based approach in U.S. GAAP.

“If you think about this new standard, this is the first standard under the FASB in the U.S. that is guided to be a principles-based standard rather than a rules-based standard, which we have historically had in the U.S.,” he said. “I think when you put forth a principles-based standard, you’re certainly going to have a lot of questions. There is always the risk that with all of the questions and interpretive guidance that are going to be wanted, one might worry that this might drive us back into rules-based [standards]. I think the TRG, the IASB, the FASB and others have to be careful. If their idea was that they want to issue principles-based [standards], they don’t want to have strict rules. Then it will be a delicate balance in how they provide interpretive guidance without getting us back to where we are today, which is a lot of strict rules. I think the guidance is helpful as it relates to applying principles, but in my view that’s going to be one of the key items around the transition: How do preparers and external auditors use financial statements? How does that work in a principles-based environment as opposed to a rule-based [environment]? This is kind of the first time through, if you will, because this is the first principles-based standard that’s been issued, and this is a pretty significant line item we’re talking about, as it relates to revenue with customers.”

The panel discussion that Hobbs led focused on the lifecycle transition of the standard.

“What does that lifecycle look like?” he said. “What are companies doing? All the way from planning and assessing through the implementation, design, and then when you are done with the cycle, you put in not only a reporting structure, but you also put in the processes, controls and data capture systems such that you’ve got a process going forward post-transition, that you can generate good, accurate information on a timely basis, quarter in and quarter out. There was a lot of discussion around the lifecycle, and what are companies doing specifically around planning and preparing. Who are they involving within the company? What are some of the cross-functional considerations that they’re seeing? What are some of the other non-accounting and finance implications of this standard that are emerging, and how are companies dealing with those types of issues?”

The panelists also discussed the types of approaches that might be taken on the transition, whether it should be retrospective or prospective, along with some of the considerations to think about, not only from a reporting standpoint, but what it might mean for companies that will need to parallel-track and parallel-capture data and have parallel reporting for some period of time.

“The idea of that panel was to give the audience a pretty good idea of what does the framework of this transition look like,” Hobbs explained. “What are some of the key things companies ought to be thinking about? Then we actually went through some tools and processes. Then some preparers talked about where they were at in this timeline, specifically some of things they were doing, who they were getting involved, what they were doing for planning, training, communications, etc.”

The purpose of the conference was to convince accountants and their companies to begin to focus on implementation of the new standard. “For companies there have been a lot of theoretical discussions about the new standard and the technical accounting requirements, but the focus of this conference was really about implementation,” said Hobbs. “You can spend a lot of time on the standard, but at some point you need to start thinking about not only the reporting, but the other ramifications of this standard, and begin to plan and prepare for it, because for some companies this can be a very significant effort for them.”