Representatives from private companies and their auditors told the FASB on June 26, 2018, that it will be a scramble to the finish line for many of them as they implement the board’s revenue accounting standard.
Members of the FASB’s Private Company Council (PCC) described the struggles of implementing the changes in Accounting Standards Update, Revenue From Contracts With Customers. The standard erased reams of industry specific revenue guidance in U.S. GAAP that financial reporting professionals have used for decades. Public companies had to start applying the new guidance in the first quarter of 2018, but private companies have until 2019 to switch. The meeting of the FASB and its PCC was part of the accounting board’s recurring look at the cost and benefits of implementing its amendments to U.S. GAAP.
In addition, the breadth of the new accounting standard is unlike most of the updates to U.S. GAAP the FASB has published in recent years. Most updates are “bite sized”, but the revenue standard consists of 700 pages spread among three documents.
The new revenue standard will not directly affect a company’s business fundamentals or its cash flows, but it is expected to result in significant changes to the timing of the revenue recognition and its magnitude.
We highly recommend read the new revenue standard and discussing it with us before publishing any interim or year-end financial statements.