In the steady march to new accounting for revenue recognition, the American Institute of Certified Public Company Accountants has some more new implementation drafts for companies to consider.
The AICPA’s Financial Reporting Executive Committee has released five new working drafts of accounting issues related to the new revenue recognition standard that will be folded into the AICPA’s evolving audit and accounting guide on the new requirements. Developed and drafted by industry-specific working groups that are plowing through questions specific to their particular sectors, the latest drafts focus on issues of concern to aerospace and defense companies, power and utility companies, timeshare entities, and broker-dealers.
The aerospace task force has issued a working draft that explores identifying performance obligations, an issue regarded as having high importance. The issue is focused on identifying the unit of account in the design, development, and production of contracts. The draft explains the requirements under the original standard issued in 2014, as well as the clarification FASB issued in 2016, and relates the requirements to the types of contracts that are typical in aerospace and defense transactions.
For broker-dealers, the AICAP task force issued two drafts, one focused on questions around when a broker-dealer is acting as a principal in an arrangement vs. acting as an agent, answering uncertainties about how to look at the costs associated with underwriting. The second draft explores how to view costs associated with advisory services.
In the power and utility working draft, companies will find information on how to account for tariff sales to regulated customers, and for timeshares, the focus is on management fee agreements.
The AICPA has already issued a first edition of its evolving audit and accounting guide on revenue recognition and plans to issue further editions as emerging drafts are vetted through public comment and finalized. The AICPA guide does not carry the same authority as official guidance issued by the Financial Accounting Standards Board, but is meant to help companies compare notes and arrive at common views before they commit those views to determinations that will be published in financial statements.
AICPA’s FinRec, which is overseeing the industry task forces producing the working drafts, is asking for comment on the latest round by May 1. Public companies are required to adopt the standard in 2018, and a few entities have already disclosed they are adopting the standard early, as of Jan. 1 2017.