July 2012 – The FASB now put the Finalization date as “First Half of 2013” as part of their technical plan.
The joint FASB/IASB Project began deliberations in 2002 with the final standard expected later this year (2012) and an effective date of 2015 or 2016. The Exposure draft was issued on November 14, 2011 – with comments due by March 13, 2012.
PwC’s Mike Sandusky observed at the recent Financial Accounting & Reporting Update in Philadelphia, “The proposed standard will be a significant shift in how revenue is recognized in many circumstances. The effect could be considerable, requiring management to perform a comprehensive review of existing contracts, business models, company practices, and accounting policies.”
Chris Lohin, Director of Revenue Accounting at SAP, shared the dais with Mike and mentioned that the implications for the standard could be very broad – and may extend to other functions within companies including IT, Treasury, Tax and even HR.
The scope of the project includes all entities and industries. Mike Sandusky covered the steps to apply the proposed standard in his presentation:
1. Identify the contract with the customer
2. Identify the separate performance obligation in the contract(s)
3. Determine the transaction price
4. Allocate the transaction price to the separate performance obligations
5. Recognize revenue when a performance obligation is satisfied
Mr. Sandusky and Mr. Lohin closed with a discussion of what companies should be doing now in preparation. Their recommendations included garnering an understanding of the new guidance in detail, determining the impact on your companies processes, systems and controls, creating a centralized repository of customer contracts and commenting on the exposure draft.
Accounting Conferences and Seminars has scheduled three conferences led by the Big 4 to review existing guidance and address the key developments in revenue recognition.
Revenue Recognition Accounting Update Conference scheduled for September 13-14 in Chicago and December 4-5 in Santa Clara, CA. Click here for the link to the agenda and registration information: