The US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) plan to create a joint transition resource group to aid in implementation of the upcoming, converged standard on revenue recognition.
The standard will have wide-ranging implications for many businesses, and the transition group will be tasked with keeping the boards up to date about interpretive issues that arise when organisations implement the standard.
The group will analyse and discuss issues that apply to common transactions that could lead to diversity in practice, and will help the boards determine if action needs to be taken to resolve that potential diversity. The group will act to advise the boards and will not issue its own guidance.
“Effective implementation of the revenue recognition standard is critical to its success in providing financial statement users with the information they need to make the right decisions about how to allocate their capital,” FASB Chairman Russell Golden said in a news release. “The boards are committed to ensuring a smooth transition to the new standard.”
Members of both boards, as well as preparers, auditors, regulators and users, will be represented on the 10- to 15-member transition group.
Transition guidance may be sought particularly by businesses in the US, which are accustomed to FASB revenue recognition standards that contain many more prescriptive rules than the more principles-based, converged standard that is about to be released.
In December, Leslie Seidman – who was FASB’s chairman at the time – expressed concern over what she perceived as the IASB’s lack of urgency with regard to implementation guidance for the revenue recognition standard.
“We need to proactively monitor the need for clarification on the [revenue recognition] standard, and we have to have a protocol with the IASB to deal with these issues so we can stay converged,” Seidman said at the American Institute of CPAs Conference on Current SEC and PCAOB Developments.
The new resource group appears to be a way to address that concern, at least through the transition period. The group is intended to have a limited existence, and its primary activities are likely to take place before the standard takes effect in 2017.
“Revenue is a key performance indicator and is important to every business,” IASB Chairman Hans Hoogervorst said in a news release. “Our joint transition group will help to ensure that stakeholders are reading the words in the new standard the way that we intend that they be read.”
—Ken Tysiac (firstname.lastname@example.org) is a CGMA Magazine senior editor.