It’s been a long and winding road for this particular ASU. Its lifecycle has consisted of a series of meetings, feedback, revisions and – like any major regulatory update worth its salt – deferrals. It’s not surprising considering it’s such an enormous piece of legislation that will have a significant impact on most companies.
Here’s a recap of the biggest moments in the revenue recognition update saga since it was first introduced 13 years ago.
January 2002 – FASB releases a proposal for public comment on Issues Related to the Recognition of Revenues and Liabilities, and shortly thereafter, joins forces with the IASB to create a converged standard.
December 2008 – The FASB and IASB (aka: the boards) publish a discussion paper entitled Preliminary Views on Revenue Recognition in Contracts with Customers, which is open for public comment.
June 2010 – The boards publish the first of many revenue recognition Exposure Drafts, which was open for comment until October 2010.
November 2011 – The FASB and IASB issue a revised Exposure Draft on revenue recognition. This particular draft was open for public comment until March 2012.
May 2014 – The long-awaited joint converged standard is adopted by the FASB and IASB. (You can read the final ASU here.) IASB Chairman Hans Hoogervorst states: “The successful conclusion of this project is a major achievement for both boards. Together, we have improved the revenue requirements of both IFRS and US GAAP, while managing to achieve a fully converged Standard. Our attention now turns to ensuring a successful transition to these new requirements.”
June 2014 – The boards form the Transition Resource Group (TRG) to collect feedback, answer questions and otherwise liaise between stakeholders and the boards to help organizations effectively implement the revenue recognition standard. Members of the TRG represent a wide spectrum of key stakeholders, including financial statement preparers, auditors and users in various industries and regions, from both public and privately owned companies. The dialogue will remain open, as the TRG plans to meet four times in 2015.
April 2015 – FASB issues an ASU for public comment proposing to delay the implementation of the new rev rec standard by one year. This follows complaints from stakeholders that the timeframe for implementation was too tight, especially given how substantial the internal financial reporting changes will be. FASB also decides to permit early adoption of the new standard by both public and private companies.
July 2015 – The FASB officially votes to defer the effective date of its rev rec standard by one year. This keeps it aligned with the IASB’s timeframe, and also gives companies more time to research and strategize on the execution requirements.
Late 2015 – The FASB is expected to issue the final Accounting Standards Update formally amending the effective date.
December 2016 – As per the FASB’s latest update, well-prepared companies can start implementing the new standard after this date, though it won’t become mandatory for another year.
December 2017 – After 15 December 2017, the revised revenue recognition standard will come into full effect, meaning that all public companies and select non-profit organizations will be required to file using the updated standards.
This high-level timeline brings us up to date, and provides a look into the future of implementation as it stands today. The deferral is nice because it gives companies a little bit of breathing room, but it’s also imperative to recognize that preparations should still begin now. This new standard is no small adjustment. It will have far-reaching, lasting impacts on several facets of the financial reporting process at most organizations.
With that in mind, check out our third and final post in the Revenue Recognition series, coming tomorrow: Where Do You Go From Here? Prep Tips for Handling the New Revenue Recognition Standard.