Companies working to implement new revenue recognition requirements have yet more guidance to consider as the American Institute of Certified Public Accountants releases four more working drafts for its evolving revenue recognition guide.
The AICPA’s Financial Reporting Executive Committee released drafts of interest to entities in airline, gaming, health care, and telecommunication sectors, discussing four separate issues that task forces have vetted to arrive at some common conclusions. FinREC is overseeing more than a dozen AICPA task forces that are poring over hundreds of implementation questions and issues to help steer companies in specific industry sectors toward consistent accounting conclusions as they work to apply the new rules.
The draft for airlines looks at regional contracts among carriers, governing capacity purchase agreements that are common among regional and major carriers. The draft for gaming entities addresses how to parse out the revenue associated with base progressive and incremental progressive jackpot amounts. In health care, the task force has pondered how to apply the new accounting to third-party settlement estimates; and in the telecommunications sector, the AICPA is devoting a single draft to miscellaneous revenue questions.
Public companies are required to begin reflecting new revenue recognition rules in their financial statements beginning Jan. 1, 2018. Private companies have an extra year to prepare. Accounting leaders generally say companies started too late and are now way behind where they should be to develop the systems, process, and controls necessary to follow the new five-step method for recognizing revenue.
The new standard, issued by the Financial Accounting Standards Board in 2014, does away with hundreds of piecemeal, industry-specific accounting pronouncements that formed the body of GAAP for how to recognize revenue to establish a single method to be followed by all companies, regardless of sector. The AICPA formed its industry task forces because it recognized companies moving away from industry-specific rules would have common questions specific to their sectors about adopting the new standard.
FinREC is asking for comments on the four latest drafts by Sept. 1, so the feedback can be incorporated in final form into the AICPA’s Revenue Recognition guide, which is meant to help companies apply the massive new accounting standard as it begins to take effect in 2018.