IASB and FASB Announce Joint Revenue Standard
Issued today, the International Accounting Standards Board (“IASB”) and Financial Accounting Standards Board (“FASB”) have released a joint standard on revenue recognition from contracts with customers. This is a major accomplishment of the work to converge a key area of financial accounting between International Financial Reporting Standards and U.S. GAAP. Accounting Standards Update (“ASU”) 2014-09 provides enhancements to the quality and consistency of how revenue is reported. The IASB and FASB’s new standard will require the recognition of revenue as goods or services are transferred to customers in amounts that reflect payment the company expects to receive in exchange. In addition to changes in recognition and measurement, the ASU also includes additional disclosures regarding the revenue recognition process. The ASU includes a five step process for recognizing revenue replacing the current four criteria methodology used in the U.S.
Additionally, the new standard will offer guidance for transactions that were not previously addressed in detail and multiple-element arrangements. Both boards plan to aid transition of the new standard with its joint resource group. For a public entity, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted for public entities. All other entities are required to apply the amendments in annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early application would be permitted for private entities with certain limitations.
For the news release on this announcement, click here.