|The FASB and IASB (Boards) will issue a single standard for revenue recognition, expected to be released in the second half of 2013, which would converge U.S. GAAP and IFRS and apply to all industries and transactions.
The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. This standard has the potential to affect every entity’s day-to-day accounting and, possibly, the way business is executed through contracts with customers.
The Boards tentatively decided that public entities will be required to apply the revenue recognition standard for annual and interim reporting periods beginning after December 15, 2016. Early adoption is prohibited for public entities. Nonpublic entities will be required to apply the revenue standard for annual and interim reporting periods beginning after December 15, 2017. Nonpublic entities may also elect to apply the revenue recognition standard for periods beginning after December 15, 2016 (the same as public entities but not earlier).
The Boards tentatively decided that the revenue recognition standard could be applied retrospectively including any combination of practical expedients discussed, or recognize the cumulative effect of initially applying the new revenue recognition standard as an adjustment to the opening balance of retained earnings in the year of initial application.
The Boards have provided a delayed effective date, and the AICPA will help practitioners use that time wisely to prepare for the transition to the new revenue recognition standard and the potential impacts on financial statements, information systems, processes and controls.