To answer early political pressure over the new accounting standard on revenue recognition, the Financial Accounting Standards Board is pledging its readiness to work through implementation issues as they are identified and brought to the board for action.

FASB Chairman Russ Golden sent a letter to Sen. Carl Levin, the soon-to-retire chairman of the Senate Subcommittee on Investigations, in response to charging FASB has put convergence with international rules ahead of U.S. investor concerns in adopting a more principles-based approach to revenue recognition. “The FASB stands ready to be responsive to concerns raised by our stakeholders and to work with the (Securities and Exchange Commission) if the commission identifies any areas where the standard does not deal robustly with practice issues,” Golden writes.

In May, FASB and the International Accounting Standards Board adopted a comprehensive new approach for recognizing revenue that is meant to improve and bring consistency to the reporting of revenue across industry sectors and across jurisdictions. The two boards formed a Joint Transition Resource Group to take stock of implementation concerns that are raised and determine whether to recommend board action on any of them. So far, the group has cataloged more than two dozen issues that it plans to study. The standard takes effect in 2017, with most public companies so far still forming their implementation plans and determining their adoption method.

Levin criticized FASB for adopting a standard that requires, or allows, more judgment in the determination of revenue, giving companies opportunities to abuse the rules to accelerate revenue recognition. “The convergence standards simply offer less investor protection and may return us to a time when financial reporting fraud was more prevalent,” he wrote. Levin urged FASB to consider strengthening the standard or issue “anti-abuse rules to combat potential misuse” of the standard, to make enforcement of accurate accounting standards possible and effective.

Golden defends the standard’s application of judgement. “The use of judgment often is necessary in accounting standards to ensure that the economics of complex business transactions are reflected in financial statements in a representationally faithful manner,” he writes. “Prescriptive rules sometimes cause economically similar transactions to be accounted for differently, and that inconsistency makes analysis difficult for financial statement users.” He points out the standard adopted by FASB includes implementation guidance with more than 60 examples to address many of the ways a company will need to apply judgment.

Golden also defended FASB and IASB’s process in issuing the standard, following more than a decade of joint meetings, multiple exposure drafts seeking feedback, and hundreds of meetings with stakeholders globally. “The result, I believe, is a standard that succeeds in both improving and converging financial reporting,” he writes.

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