Implementation of revenue standard to impose “tremendous” costs.
During a meeting with FASB's Financial Accounting Standards Advisory Council (FASAC), board member Lawrence Smith raised concerns about the landmark revenue recognition standard, which goes into effect for public companies next year. Smith voted for the standard, but now he is concerned that the implementation process will require “tremendous” costs, even for the industries for which the accounting change will be relatively modest. “For those companies where transactions are effectively going to be reported in the same way that they were previously, I kind of scratch my head and now and say, ‘Gee, was that cost really all that worth it?’” Smith said. As he now sees it, FASB may have better served investors and other constituents if it had explored targeted improvements to its existing revenue guidance and not rewritten the standards completely. Public companies must comply with the new revenue guidance in 2018. It is expected to create major accounting changes in the software and telecommunications industries, but in some other sectors, such as retail, the change is not expected to be as dramatic.
The U.K. has formally started the process to leave the European Union, raising questions about IFRS adoption in a major international market.
Hedge accounting amendments slated for third-quarter release date.
FASB is prepared to release a final set of amendments to its hedge accounting standard this summer. The accounting board initiated the project to improve the alignment of hedge accounting and risk management activities by taking away some of the restrictions that made hedge accounting too difficult to apply for many businesses. The board's research staff expects to draft the final version of the amendments and bring them to the board in May for a last round of debate. Chairman Russell Golden said he expects FASB's staff to begin entering the necessary editorial changes into the Accounting Standards Codification in late June.
Next steps on insurance, disclosures to wait until July.
FASB does not plan to take formal action on its plan to make accounting for insurance companies more transparent or on its effort to overhaul financial statement disclosures until at least July, FASB Chairman Russell Golden announced. Speaking at a meeting of the FASAC, Golden said the board wanted to wait until its incoming member, Marsha Hunt, took her seat on July 1. Golden said he expected FASB to hold educational sessions on the two topics in May.