FASB and IASB Issue Revenue Recognition Standard
More than a decade in the making, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have released a converged standard on revenue recognition. Titled, â€śRevenue from Contracts with Customersâ€ť, the standard is designed to enhance the process of revenue reporting and improve comparability in financial statements among corporations using IFRS and U.S. GAAP.
The standard also impacts the sale of nonfinancial assets to noncustomers, such as real estate. In an in-depth interview with Accounting Today, FASB member, Marc Siegel expanded on this example, stating,
â€śEven though you might not be a home builder and you might just be a general manufacturer, if you sell your building or your headquarters land, whereas today you would have to go through a very detailed and prescriptive FAS 66 analysis to understand when you can recognize that gain on your sale of real estate, you would look to this new standard to figure out when you would recognize and measure the gain. It wouldn’t be showing up as revenue, but it would help you understand how and when to recognize the gain on the sale of real estate.â€ť
Both boards have created the Revenue Recognition Joint Transition Resource Group to help companies adjust to the new standards. It takes effect for public companies in 2017 and private companies in 2018. For more information on the new standards, visit Accounting Today.