The initial exposure draft conveying proposed new guidance for revenue recognition was issued in June 2010 with a projected final accounting standards update expected to be released in the second quarter of 2011. However, after deliberating over approximately 1,000 comment letters, of which an estimated one-third were from construction industry respondents, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) agreed on June 15, 2011 to re-expose their proposals for a common revenue recognition standard. The current plan is to re-expose the revised proposed revenue recognition guidance in the third quarter of 2011 for a comment period of 120 days.
What is the impact of that decision and why was it reached?
Interested parties now have the opportunity to comment on revisions the boards proposed since the publication of the June 2010 exposure draft and the receipt of the many comment letters. In other words, stakeholders now have a chance to assess whether the boards sufficiently understood and addressed the issues outlined in the previous comment letters. If not, there is a forum for new comments to be provided on this hot topic, rather than implementing an accounting standards update that may be flawed in certain respects.
Although there is no formal due process requirement to re-expose the proposals, it appears that the IASB and FASB considered the many comment letters and felt it was most appropriate to go beyond established due process by re-exposing their revised proposals. Given that revenue is significant to all companies in one way or another, the boards properly recognized the need for additional outreach on this very important topic.
We now anxiously await the revised revenue recognition proposals!
Please contact Eugene DeFrank, Audit and Assurance Shareholder, if you have questions about the revised revenue recognition proposal.
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