Investors Unfazed by Revenue Recognition Changes

Chris Gaetano
Published Date:
Dec 18, 2017

The Financial Accounting Standards Board's new rules on revenue recognition, which is effective for periods beginning after Dec. 15, 2017, represents a fundamental shift in how companies understand revenue, but investors are not particularly troubled by these changes, according to The new standards, approved in 2014 as part of the board's convergence efforts with the International Accounting Standards Board, replaces the myriad industry-specific guidance in the literature with a unitary model based around the identification and completion of performance obligations to determine when a company can book something as revenue.

However a panel of representatives from major investment companies found most agreed that whatever bottom-line impacts the new standards may produce, they are only temporary, and the changes won't have much long-term impact on actual cash flow. Further, panelists agreed that there were going to be far more pressing matters for investors to focus on than a change in accounting standards, such as tax reform. 

This will likely be good news for companies, many of which are still unprepared to implement the new standards. A June survey found only 11 percent of companies were making preparations for the new rules, which is similar to another survey around the same time that found 73 percent of companies have not yet begun even designing process or IT changes, let alone implementing them.  

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