FASB finalizes one-year deferral of the new revenue standard

In brief , PwC US Jul 11, 2015

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On July 9, the FASB decided to delay the effective date of the new revenue standard by one year.

Authored by

Brett E. Cohen

Accounting Services Group Partner, U.S. National Office, PwC US

+1 (973) 236 7201

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Anthi Stefanou

Senior Manager, US, PwC US

1-973-236-7371

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What happened?

On July 9, the FASB decided to delay the effective date of the new revenue standard by one year. Reporting entities may choose to adopt the standard as of the original effective date. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The IASB has also proposed a one-year deferral of the new revenue standard, but it has not yet made a final decision.

What are the key provisions?

Public entities

For public entities1 that follow U.S. GAAP, the deferral results in the new revenue standard being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Calendar year-end public entities are therefore required to apply the new revenue guidance beginning in their 2018 interim and annual financial statements.

Nonpublic entities

Nonpublic entities are required to apply the new revenue standard for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Nonpublic calendar year-end entities are therefore required to apply the new revenue standard in their 2019 annual financial statements and 2020 interim financial statements.

Early adoption

The FASB decided to allow earlier adoption of the new revenue standard. However, entities reporting under U.S. GAAP are not permitted to adopt the standard earlier than the original effective date for public entities (that is, no earlier than 2017 for calendar year-end entities).


1 "Public entities” includes public business entities, not-for-profit entities that have issued, or are a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and employee benefit plans that file or furnish financial statements with or to the SEC.

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Why is this important?

Implementation of the new revenue standard is expected to be a significant undertaking for many entities. The additional time should be used to fully assess the impact of the guidance and implement the necessary changes to processes, controls, and systems.

Entities will need to evaluate whether they want to adopt the new revenue standard at the earlier date (i.e., the original effective date) or wait until the required effective date.

What’s next?

The FASB will issue a final Accounting Standards Update that reflects the revised effective date. The FASB has also proposed additional amendments to the new revenue standard. Refer to In brief US2015-14 for further information.

In April, the IASB proposed a deferral of the effective date of the new revenue standard by one year, with early adoption permitted. The comment period for the IASB’s proposal ended on July 3, and we expect the IASB to discuss the topic later in July.

Questions?

PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams who have questions should contact the Revenue team in the National Professional Services Group (1-973-236-7804).

Contact us

David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group, PwC US
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