more-arw search

IFRS Decisions Loom on Horizon

Some rules may change with a new FASB-IASB accounting proposal.

The Financial Accounting Standards Board and International Accounting Standards Board have jointly issued another draft that would affect how customer contract revenues are included on financial reports. 

The groups are seeking comments from the public on the proposed standard, which would implement a "more robust" policy for how companies address problems with recognizing revenue, and would also strip out existing inconsistencies in the current requirements.

Additionally, the standard would specify how to calculate the transfer of a good or service over a period of time, make warranty proposals more simple, only apply the onerous test to long-term services and give non-public entities that use the Generally Accepted Accounting Principles an exemption from some of the disclosures.

"Revenue is the top line and it is important to every business," Hans Hoogervorst, chairman of the IASB, said in regards to the latest exposure draft. "Our proposals will give analysts and investors the confidence that revenue is being presented on a consistent basis, across industries and continents."

The draft also touches on how an organization sets a price and decides on time-value of money, collectibility and "variable consideration," as well as how an entity recognizes the costs associated with obtaining a contract.

Leslie F. Seidman, chairman of the FASB, noted that the new draft would simplify and clarify the whole process.

He added that because the new standard would impact so many companies in a variety of industries, the groups wanted to make sure everyone - auditors, investors and corporations - understood the standard.

If the Securities and Exchange Commission does decide to implement aspects of IFRS in U.S. accounting standards, many businesses will have to change their current processes for submitting financial reports. To assist with the transition, PwC has issued an updated version of its guide, IFRS and US GAAP: Similarities and Differences.

"Although the future of IFRS in the U.S. financial reporting system is uncertain, IFRS already affects U.S. companies today due to cross-border mergers and acquisitions, through the adoption of IFRS for statutory purposes by non-U.S. subsidiaries, and in business dealings with non-US customers and vendors," the organization said.  

Products and Companies: