Posted by Kari Hulac on Thursday, June 5, 2014 - 00:00
The rollout of the new revenue recognition standards by the Financial Accounting Standards Board (FASB) last week has been a much-discussed topic in the finance and accounting blogosphere.
In the United States, according to a new Protiviti report about the standards, "The new guidance will replace most of the industry-specific generally accepted accounting principles (GAAP) requirements that have become complex and cumbersome to apply."
Internationally, the standards will update the international financial reporting standards (IFRS) for revenue recognition.
The overall goal, says the FASB, is to establish one common set of principles “to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue from contracts with customers.”
I've compiled some resources and articles to help you make sense of the changes:
FASB: First, for all the basics, go to the FASB Revenue Recognition page. It is organized by tabs covering key questions finance and accounting professionals might have: What is the Core Principle; How Will the New Standard Change Current U.S. GAAP; Who Will Be Affected by the New Guidance; What is the Joint Transition Resource Group (TRG); How Can I Submit an Issue for the TRG; and When Will the Final Accounting Standards Update Be Effective.
Also, visit the Protiviti website to download the It’s Here, Are You Ready? report summarizing the changes. The in-depth report dissects what’s new and examines the five steps of the new core principles behind the changes (see graph below), which aim to evaluate contracts and commitments to customers and then to identify and deliver performance obligations.
For a news summary of the significance of the changes, this Nasdaq.com article explains in general terms how the changes will affect the reporting of a company’s revenue over time and gives examples in different industries.
Expect more talk about the topic the week of June 16, when the Financial Executives International (FEI) Revenue Recognition Conference will be held in New York. Even if you can’t attend, highlights will be available about best practices for executing the new standards.
Top photo credit: Lending Memo/Flickr Creative Commons/Some rights reserved
Bottom photo credit: Protiviti It's Here, Are You Ready? report on the new revenue recognition standards