As the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) continue to discuss proposals for clarifying the new, converged standard on revenue recognition, KPMG has found that a majority of companies (64%) remain unsettled on how they would adopt the standard.
Nearly one-third of the corporate finance executives surveyed by KPMG listed revenue recognition implementation as their top concern for year-end reporting. And the spectre of future regulations is a top compliance concern for more than half of the respondents in a poll of 450 financial reporting executives at an annual KPMG symposium in December.
In addition to the nearly 51% who cite future regulation as a compliance concern, 22% cited tax compliance, 16% cited navigation of current regulatory compliance, and 11% cited data infiltration and IT security as top concerns.
About 40% said simplification of standards should be FASB’s top priority, and 37% said that providing clear application and implementation guidance on the new standard should be a top priority.
Beyond the year-end reporting concern about revenue recognition (32%), about 22% listed their top concern as improving the effectiveness of disclosures, and 20% said a top concern was implementing the 2013 update of the internal control framework created by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
COSO is an initiative of five private-sector organisations that jointly offer thought leadership on enterprise risk management, internal control, and fraud deterrence. The American Institute of CPAs is a member of COSO.
Thirty-one per cent said they would implement the updated COSO framework this year, about 43% said they planned to adopt it by the end of 2014, and about 25% said they were uncertain about when they might implement the framework.
“Between revenue recognition and COSO, it’s a significant year for changes in financial reporting, both in the framework and the standards,” Thomas Duffy, KPMG’s national managing partner for Audit, said in a news release. “This requires adequate planning and resources to ensure a smooth transition in the year ahead.”
Additionally, executives expressed hesitation about whether their companies would adopt International Financial Reporting Standards (IFRS) if the US Securities and Exchange Commission provided the standard as an option for public companies. About half (51%) were undecided, about 40% said they would not adopt IFRS, and about 8% said they would adopt IFRS “as soon as practicable.”
Related CGMA Magazine content:
“COSO’s Risk-Management Framework to Undergo Update”: The Committee of Sponsoring Organizations of the Treadway Commission announced in October 2014 that it was undertaking a project to update its Enterprise Risk Management – Integrated Framework, which debuted in 2004.
“US Board Members Cite Challenges in Revenue Recognition Implementation”: Board members of US public companies cite updating systems and policies and revising existing contracts with customers as the most challenging aspects of the new revenue recognition standard issued by FASB, according to a survey in late 2014.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.