FASB Makes It Official on Deferral of Revenue Recognition

The Financial Accounting Standards Board issued an accounting standards update on Wednesday deferring by one year the effective date of the converged revenue recognition standard that it released last year with the International Accounting Standards Board.

FASB made the decision at a meeting last month to defer the effective date of the standard. That will give companies more time to implement the standard and add guidance to clarify certain aspects involving licensing revenue and performance obligations (see FASB Votes to Defer Revenue Recognition Standard). The IASB has followed suit.

FASB said public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the new standard to annual reporting periods beginning after Dec. 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after Dec. 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance to annual reporting periods beginning after Dec. 15, 2018, and interim reporting periods within annual reporting periods beginning after Dec. 15, 2019.

All other entities may apply the guidance earlier as of an annual reporting period beginning after Dec. 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance earlier as of an annual reporting period beginning after Dec. 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance.

Meanwhile at least one Silicon Valley-based accounting and consulting firm, RoseRyan, is taking advantage of the delay to offer a revenue recognition strategy service to help companies create a “game plan” for moving to the new standard.

“It’s really no exaggeration to say that for many companies this will be a significant change,” said RoseRyan CEO Kathy Ryan in a statement. “For some, especially in fields operating under the old, industry-specific rules, like tech and some sectors of the life sciences, it can present a watershed moment.”