The Financial Accounting Standards Board and the International Accounting Standards Board have been holding a series of meetings of their Joint Transition Resource Group as they prepare for implementation of their converged standard on revenue recognition.
There have been plenty of matters for them to discuss, including the possibility of a delay in the effective date of the standard beyond 2017, which FASB is currently weighing.
At their third meeting on January 26, the boards updated each other on their outreach on various issues such as licenses, the identification of distinct goods or services, and principal vs. agent (gross vs. net) considerations. FASB’s staff announced that stakeholder outreach is still ongoing related to the potential delay in the effective date of the new standard. FASB expects to vote on any delay in the effective date in the early part of the second quarter of this year.
Dusty Stallings, a partner in the Capital Markets Accounting and Advisory Services practice at PricewaterhouseCoopers, has been keeping a close eye on the meetings so far. “I think they made very good progress at the last meeting, probably better progress than perhaps they had made at the first few meetings, but there’s still a lot of work that needs to be done, even on things that were discussed at prior meetings,” she told Accounting Today.
Among the major outstanding items are providing guidance on licenses, identifying when companies have a performance obligation that should be accounted for separately from other performance obligations, and principal/agent considerations. “Principal/agent accounting drives whether you gross up your revenue or net your revenue,” said Stallings. “That’s actually a fairly big-ticket item that affects a lot of industries.”
At the last meeting, there was also some discussion around the consideration paid to a customer, and whether one is a customer or not. “That’s going to be very impactful for certain industries as well,” said Stallings.
She has also heard a great deal of talk at the meetings on a possible delay of the revenue recognition standard.
“That has come up fairly regularly,” said Stallings. “The FASB did talk about doing some outreach to try to find out from some companies that are trying to apply the standard if they were encountering difficulties, and if they felt they needed more time. They expect to complete that outreach early in the second quarter and come back with a decision on whether or not to provide an extension. I think that everyone believes that an extension, if granted, would be a year, but they haven’t actually said.”
The IASB, however, is allowing companies to adopt the new standard early before it becomes a requirement under International Financial Reporting Standards, so it is not clear if it will go along with a delay if FASB decides to delay the effective date of the standard under U.S. GAAP.
“From what we understand the IASB has not gotten the level of issues raised to them that the FASB has gotten raised in the United States, so there’s less of an insistence to delay the standard further,” said Stallings. “But we do understand that they are watching the FASB and the FASB’s outreach to see what kinds of concerns would be raised so they can factor that into any decision they might ultimately make.”
So far, the two boards seem to be getting along during their discussions.
“Most of the meetings that we’ve had have really been the Transition Resource Group meetings where the boards are trying to get input from other constituents,” said Stallings. “There is a board meeting coming up in February, so now that they’re debating some of these topics for the first time since the standard was issued, it will be interesting to see how well they seem to work together. They seem to be working well together in the Transition Resource Group office, but there’s always going to be a bit of a difference between U.S. constituents and international constituents as it relates to the level of detail that they need. International constituents that have spent time with IFRS are accustomed to working with less detailed guidance and fewer rules than U.S. constituents. That’s probably driving some of the IASB’s thinking, while the FASB is getting more pressure for more guidance.”
Stallings is encouraging accountants to monitor the proceedings through the video webcasts that FASB and the IASB are providing of the TRG meetings. The next one is scheduled for March 30, and the previous meetings are archived. They can be accessed here.
“I really encourage people to stay in touch with what’s being discussed so that they know where they should be focusing their energy as they go through their transition process as opposed to where they should potentially wait because it’s currently an item under discussion,” said Stallings.