Shelby L. Stenson, The Daily Record Newswire
There have been a lot of articles and discussion regarding the proposed revenue recognition standard and as to whether the Financial Accounting Standards Board’s Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) will be delayed.
On April 29, the FASB issued a proposed ASU for public comment, which would defer the effective date of the new revenue standard by one year. The deadline for comments on the proposal was last week. In coming to this decision, the board members and staff performed field visits to public and private companies, performed outreach with various stakeholders and conducted other research to judge whether the standard should be delayed to allow more time for all organizations (i.e., public and private companies, as well as nonprofits) to get prepared to implement the new standard.
If the FASB’s proposed ASU is finalized, public organizations would apply the new revenue standard to annual reporting periods beginning after Dec. 15, 2017. Nonpublic organizations would apply the new revenue standard to annual reporting periods beginning after Dec. 15, 2018. Simply put, it would take effect in 2018 for calendar year-end public entities. For private entities, including nonprofits, it would take effect in 2019.
Public organizations would apply the new revenue standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2017 (that is, a public organization would be required to apply the new revenue standard beginning in the first interim period within the year of adoption). Nonpublic organizations would apply the new revenue standard to interim reporting periods within annual reporting periods beginning after Dec. 15, 2019 (that is, a nonpublic organization would not be required to apply the new revenue standard in interim periods within the year of adoption).
Additionally, the proposed ASU would permit both public and nonpublic organizations to adopt the new revenue standard early, but not before the original public organization effective date (that is, annual periods beginning after Dec. 15, 2016).
As a reminder, this will also apply to nonprofit organizations and they should not wait to consider the implications the standard will have, even if there is a postponement of the implementation date.
The revenue recognition standard, whether or not the implementation date is delayed, will be a major change for many for profit and nonprofit organizations. Some organizations will want to retrospectively adopt the new standard, and they will need to start gathering or preserving data for 2016. This means they will need to start looking at their organization’s policies, procedures and systems now — not in 2016. By then, it might be too late.
As an entity starts to approach the implementation of the new revenue recognition model, it should be considering not only its accounting policies and procedures — which is a necessary first step — but also what it will need in terms of resources. This includes systems and people resources, processes and technology, and determining how other departments beyond the finance and accounting departments, such as development and program services, will need to be involved to make sure that the organization not only becomes compliant with the new standard, but also remains compliant in the future.
As FASB officials gather feedback from stakeholders, entities should start preparing to implement, regardless of whether or not a delay is approved. But keeping in mind the impact that the new standard will have on all entities, we would advise that instead of delaying, these organizations use every minute and resource they have available to get ready.
The proposed ASU is available at www.fasb.org.
—————
Shelby L. Stenson, CPA, is a partner with Mengel, Metzger, Barr & Co. LLP and may be reached at sstenson@mmb-co.com.
