Those entities which follow US GAAP will now have to apply the standard (Accounting Standards Update 2014-09) to their annual and interim reporting for periods after December 15 2017, rather than a year earlier. Private companies will have another year after this to incorporate the standard into their annual reporting and another year after that, that is, December 15 2019, to use it for their interim reporting.
All companies, both public and private, will be allowed to adopt the standard earlier than December 15 2017 if they want to, but not before December 15 2016, the original effective date for public entities.
FASB’s board has directed staff to draft a proposed Accounting Standards Update, with a 30-day comment period, to reflect these decisions.
FASB and the International Accounting Standards Board, which oversees the development of International Financial Reporting Standards (IFRS), issued a converged standard on revenue recognition in May 2014.
At the time, a joint statement from the two organisations said:
“The core principle of the new standard is for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.”
