Companies that recognize revenue from contracts with customers will have a long time to transition to major changes in reporting standards, with the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) announcing that proposed changes will not go into effect until reporting periods beginning Jan. 1, 2017, or later.

In June 2010, FASB and IASB proposed several new accounting standards in line with the goal of converging U.S. and international accounting rules. The boards believe that U.S. generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) can be improved by developing one global standard on revenue recognition. U.S. GAAP comprises broad revenue recognition concepts and numerous requirements for particular industries or transactions, which can result in different treatment of economically similar transactions. IFRS has fewer requirements on revenue recognition, but can be difficult to understand and apply.

Changes are designed to:

  • Remove inconsistencies and weaknesses in existing revenue requirements
  • Provide a more robust framework for addressing revenue issues
  • Improve comparability across companies, industries and capital markets
  • Provide more useful information through improved disclosure requirements
  • Simplify financial statement preparation by streamlining the volume of accounting guidance

The FASB and IASB expect to publish the standard by mid-year.

For more information on the changes and how to prepare, download our e-paper, “Revenue From Contracts With Customers: Understanding Proposed ASU No. 2011-230,” and contact Doeren Mayhew’s Accounting, Audit and Assurance Group, with CPAs in Troy, Mich., and Houston, Texas.