In brief: Boards meet separately on revenue – FASB on effective date and non-public entities, IASB on early application (No. 2013-15)

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In brief 03/22/2013 by Assurance services
In brief: Boards meet separately on revenue – FASB on effective date and non-public entities, IASB on early application (No. 2013-15)

At a glance

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) met separately in March to discuss specific U.S. GAAP and IFRS matters related to the proposed revenue recognition standard. The FASB focused on non-public entities and reached decisions on disclosure requirements, transition, and effective date. The FASB also amended its previous decision about effective date for public entities. The IASB decided to permit early application of the revenue standard. The decisions by both boards are tentative and subject to change. Any remaining “sweep” issues will be discussed at future meetings.

What's new?

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) met separately in March to discuss specific U.S. GAAP and IFRS matters related to the proposed revenue recognition standard. The FASB focused on non-public entities and reached decisions on disclosure requirements, transition, and effective date. The FASB also amended its previous decision about effective date for public entities. The IASB decided to permit early application of the revenue standard. The decisions by both boards are tentative and subject to change. Any remaining “sweep” issues will be discussed at future meetings.

What were the key FASB decisions?

Disclosures

The FASB affirmed many of its previous tentative decisions on disclosures for non-public entities. A non-public entity may elect not to provide the quantitative disaggregation disclosures required for a public entity. A non-public entity will instead be required to disclose qualitative information about the nature, amount, timing, and uncertainty of revenue and cash flows. Non-public entities electing not to provide the full disaggregation disclosures will be required to disclose a numeric disaggregation of revenue into the amount of revenue for contracts that are recognized at a point in time and those that are recognized over time.

A non-public entity will be required to disclose the closing balances of contract assets, contract liabilities, and receivables from customers, if not separately presented. A non-public entity may elect to not disclose the following:

  • Assets recognized from the costs to obtain or fulfill a contract with a customer
  • Amount of transaction price allocated to remaining performance obligations and an explanation of when it expects to recognize that revenue
  • Information about measures of progress used to recognize revenue over time
  • Judgments made in evaluating transfer of control for performance obligations satisfied at a point in time
    Information about methods and assumptions used in determining the transaction price, standalone selling prices, and return and refund obligations

Transition and effective date

A non-public entity can either apply the final standard retrospectively or use the practical expedient, consistent with the transition approaches available to public entities1.  

The revenue standard will be effective for non-public entities for annual reporting periods beginning after December 15, 2017, and for interim periods in the year thereafter. Early application will be permitted, but no earlier than the effective date for public entities.

The FASB also decided to amend its previous decision about the effective date for public entities. The revenue standard will be effective for public entities for annual reporting periods, and interim periods therein, beginning after December 15, 2016 rather than annual periods beginning on or after January 1, 2017.

What was the key IASB decision?

The IASB amended its previous decision and agreed to permit early application of the revenue standard. They decided that early application will improve accounting for revenue in the short term, and will eliminate practice issues resulting from the application of current IFRS.

Is convergence achieved?

Convergence is expected in the final revenue standard, except for interim disclosure requirements, disclosure requirements for non-public entities, and the effective date for non-public entities. Other differences might exist if the guidance requires management to refer to other standards before applying the guidance in the revenue standard.

Who's affected?

The final standard will affect most entities that apply U.S. GAAP or IFRS. Entities that currently follow industry-specific guidance should expect the greatest impact.

What’s the proposed effective date?

The FASB decided the final standard will be effective for annual reporting periods beginning after December 15, 2016 for public entities and after December 15, 2017 for non-public entities. The IASB decided the final standard will be effective for the first interim period within annual reporting periods beginning on or after January 1, 2017.

What's next?

The boards’ timeline indicates the final standard is expected in the second quarter of 2013, although any issues arising in the drafting process could push out that timing.

Questions?

PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact members of the Revenue team in the National Professional Services Group (1-973-236-4377).

1For additional discussion of the practical expedient, refer to Dataline 2013-04, Revenue from contracts to customers: Boards finalize redeliberations – A comprehensive look at the new revenue model.

Authored by:

Brett Cohen
Partner
Phone: 1-973-236-7201
Email: brett.cohen@us.pwc.com

Craig Robichaud
Partner
Phone: 1-973-236-4529
Email: craig.r.robichaud@us.pwc.com

Michelle Mulvey
Senior Manager
Phone: 1-973-236-7272
Email: michelle.l.mulvey@us.pwc.com

Anurag Saha
Senior Manager
Phone: 1-973-236-5038
Email: anurag.saha@us.pwc.com