U.S. companies may be getting more time to prepare for implementation of the new standard on recognizing revenue from contracts with customers.
At its meeting Wednesday, the Financial Accounting Standards Board voted to delay implementation a year for both public and private companies. As a result, public entities filing under GAAP will apply the new standard to annual reporting periods beginning after Dec. 15, 2017, and nonpublic entities will apply it to annual reporting periods beginning after Dec. 15, 2018.
FASB staff members who had been preparing a report on a possible deferral had recommended a two-year delay. Once the board officially issues the proposal for a delay, the public will have 30 days to comment on it before the board decides whether to enact it.
The new standard, which the boards adopted in May, requires substantial disclosures around revenue, requiring the preparation of computations and data, particularly for companies with long-term contracts.
Stakeholders had complained that the original timetable for implementation didn’t give them enough time to revamp their practices and systems to put the new rules into effect. The International Accounting Standards Board has also been considering a deferral of its new revenue recognition standard.
“It’s pretty obvious that there’s going to have to be a deferral in light of all these potential changes we’re talking about,” an IASB member said in February.
A recent survey of 100 U.S. technology company CFOs found that more than half had not yet even familiarized themselves with the changes. Only 20% said they were ready to implement the new standard and 18% said they were looking for guidance on various implementation issues.
FASB also decided Wednesday to permit both public and private entities to adopt the new revenue standard early, but not before Dec. 15, 2016.