Will IFRS' “Revenue from Contracts” Meet General Acceptance this year?

As I was getting my daily triple espresso, I ran into my good friend Seamus Moran, our resident accounting expert and walking encyclopedia.

Me: "What's up, Seamus? What's going on with the exposure draft for Rev from Contracts?"

Seamus: He says in his very professor-like, Irish accent:

The comment period on the IASB & FASB Exposure Draft “Revenue from Contracts with Customers” closed in the middle of March.  The Boards had received a little over 20 comment letters. The staff in London, UK and Norwalk, CT  will complete their report on the comment letters by July, and both Boards will have completed their subsequent redeliberations by autumn.  It is anticipated that the principle will be published by both Boards later this year in 2012.

The principle replaces “Deferred Revenue” with the concept of a liability to customers in respect of obligations to provide goods or services not yet satisfied.  That is, you no longer amortize a sales invoice, but instead, you track what goods and services you owe to customers.  Revenue is recognized in respect of goods and services for which you have satisfied the customer, valued at the consideration you expect to receive in respect of each.  The Boards articulated 5 steps in reconizing revenue.

 The principle applies to the following:

    1. All public companies who report to their owners using IFRS, that is, who are quoted on any stock market except those in Japan, India and the USA, and
    2. All public companies who report to their owners using US GAAP, that is, who are quoted on any stock market in the USA.
    3. Any other entity that chooses to use IFRS or US GAAP

The principle applies to any industry that gains revenue from contracts with customers (that is, all) except revenue that is related to insurance contracts or leasing contracts. The principle replaces IAS 16.  It also replaces topic 605 in the US GAAP Codification, as well as parts of topics 340, 360, 430, 908, 910, 912, 915, 920, 922, 926, 928, 932, 940, 942, 948, 952, 954, 970, 976, 978 and 985 plus other related sub-topics.

An effective date for the principle has not been announced. The Boards have said it will not be effective before June 2015.

The text of the exposure draft and explanatory collateral (podcasts, decks) can be downloaded from the web-sites of the FASB and the IASB.

For our Oracle customers who are concerned about Oracle's software being able to handle these changes:

Oracle is monitoring these changes and creating design documents in anticipation that the change will become generally acceptable. However, we don’t write code until the regulations are final. (You know, why build the house before you get all the permits?)  We are in discussion with the FASB & IASB about the duration of the period between the publication date and effectivity. 

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