FASB to Review Revenue Standard Implementation Costs
The Financial Accounting Standards Board (“FASB”) plans to examine how companies implement its revenue recognition standard when the guidance goes into effect next year. At a December 14 meeting, FASB Chairman Russell Golden stated that the board would undertake a comprehensive review of Accounting Standards Codification 606, Revenue From Contracts With Customers, to adjust its education process for future guidance, boost outreach with financial software providers, and find ways that could reduce implementation costs of significant standards.
Golden said the review would focus on companies that have already implemented revenue. In particular, the FASB wants to know what were the nonrecurring expenses when the new guidance was implemented, how much they initially budgeted, and what caused the difference in costs. The FASB chairman acknowledged that cost overruns might be due to factors beyond his board’s control. Such factors include software vendors updating their financial reporting systems slowly, disparities between clients and outside auditors, and implementation delays caused by uncertainty about the interpretation of the standard’s more complicated provisions.
The FASB also wants to study why companies are having trouble implementing the standard. The findings will be applied to any board actions taken to help companies, auditors and service providers adjust to major changes in U.S. GAAP. Golden noted that the board wants to provide additional educational content, which will likely improve the FASB staff’s relations with third-party professional educational organizations that prepare financial professionals for new accounting standards.
Next year’s review of the revenue standard’s implementation costs is just the beginning of the FASB’s efforts. In 2019 and 2020, the FASB will look at the standard’s recurring costs.