FASB Votes to delay Revenue Recognition Standard for a Year

By:
Chris Gaetano
Published Date:
Jul 10, 2015
Danger signThe Financial Accounting Standards Board (FASB) has voted to delay the effective date of the new revenue recognition standard by one year. Consequently, the entities to which it pertains (public companies, some not-for-profit entities and certain employee benefit plans) will apply the new standards to annual reporting periods beginning after Dec. 15, 2017, versus 2016. All other entities will apply the new revenue standards to annual reporting periods beginning after Dec. 15, 2018. Entities can adopt early, but not before the original effective date of Dec. 15, 2016. The FASB made its decision during its July 9 meeting. 

The revenue recognition standard, which was formally approved last year, is one of the major features of the joint FASB/International Accounting Standards Board (IASB) convergence project, which was intended to produce a set of high-quality standards that can be used within either framework. The product of six years of discussion, outreach, exposure and re-exposure, the standard replaces the myriad industry- and transaction-specific guidance within Generally Accepted Accounting Principles with a singular approach based on identifying, fulfilling, and recognizing performance obligations within contracts. 

However, since its approval, stakeholders have expressed concern about the time frame, as well as about aspects that they felt were impractical for some businesses. Reservations have been particularly strong from the entertainment and software industries, which make heavy use of intellectual property, the rules for which they felt could be more clear, thus prompting the initial calls for a delay. Since then, the FASB has also proposed additional clarifying guidance on licenses and performance obligations. 

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