The Financial Accounting Standards Board (“FASB”) has announced a proposal to delay by one year the effective date of implementation of the new revenue recognition standard under Generally Accepted Accounting Principles (“GAAP”), making the new date of change for public companies those reporting periods beginning after December 15, 2017. Private companies would have an additional year thereafter.
ASU 2014-09, Revenue from Contracts with Customers, has been widely heralded as an important step in the consistency of GAAP based reporting as well as the convergence of standards between FASB and the International Accounting Standards Board (“IASB”). The benefits will include increased comparability across entities, industries, jurisdictions and capital markets, as well as financial statements that are simpler to prepare and provide more useful information to users through improved disclosures. This related article contains a more detailed discussion of how to prepare for the new principles-based revenue recognition rules.
This change has been a long time coming, as evidenced by this 2009 article describing the beginnings of the process of changing to a principles based revenue recognition standard. However, the need for this additional delay demonstrates that companies still feel unprepared. For those that are more proactive, early adoption remains available as of the original effective date for public companies (reporting periods beginning after December 15, 2016), but requires doing so on an annual and interim basis. Private companies that adopt early can enact the change on an annual basis initially, and subsequently for annual and interim periods.