Although votes in late April by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to propose deferring the implementation of the new revenue recognition standard provides breathing room for preparers of financial reports, companies should avoid complacency be cause even with a deferral pending, the clock is ticking toward adoption.
In response to implementation concerns raised by a number of companies, FASB and IASB have voted to propose delaying the implementation date of the new standard by a year. Under the revised timeline, public organizations would apply the new standard to annual or periodic reporting periods beginning after December 15, 2017, and private companies would apply the standard to periods starting after December 15, 2018.
IASB's proposal to defer the implementation aligns it with a similar decision by FASB, which voted to propose the delay in early April after hearing recommendations by the FASB staff.
In addition, FASB voted to permit early adoption (as of the original effective dates) for public and nonpublic entities. FASB's proposal has entered a public comment period scheduled to end In late May.
"I am pleased the proposal provides enough flexibility to give companies more time to complete their assessment while giving other companies the ability to early adopt, " says Stephen Rivera, worldwide senior director, financial compliance & procedures, for Johnson & Johnson, after the delay was first proposed by FASB In early April. "It is a 'win-win' for many companies."
Time to Act
But despite the relaxation of the adoption timeline, financial reporting experts say it's important for companies that have been preparing to Implement the new standard to maintain their momentum--and for companies who might have waiting for a potential deferral to get moving.
"Companies should continue full-steam ahead with at least their diagnostic efforts," says Chris Wright, managing director of finance remediation and reporting compliance at Protiviti. "A quarter of that extra year is already behind us, and by the time an exposure draft is released and subjected to a comment period, the extra year could be half over."
"It's critical for any companies that haven't begun their transition efforts to start with a diagnostic process that at least demystifies how simple or complex adopting the new standard will be for them."
The decision by the standard-setting bodies to...