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Revenue Recognition: FASB Continues to Work on New Standard


Earlier this year, the Financial Accounting Standards Board (FASB) re-exposed the proposed revenue recognition standard which is anticipated to have significant impacts on how contractors account for and recognize revenues.   The draft was re-exposed due to confusion over specific guidance (or lack thereof) in the initial version, which prompted a flood of responses from various industry groups, accounting firms, and overall just a confused general populace.

The comment period for the second draft closed in March.  Again, there was confusion, but progress has been made. The FASB clearly recognized the insufficiency in guidance over the accounting for revenue where it stated “Performance Obligations are Satisfied Over Time.”

The Construction Financial Management Association and National Association of Surety Bond Producers teamed-up to respond to the FASB in March.  Their response is well thought-out and helpful in understanding how many outside the FASB understand the proposed standard, and offers insights on how the FASB perhaps could find ways to provide clarity for construction revenue recognition in the final release.  Read their letter.

Regarding the FASB, the updates tend to be vague, but the proposal is moving along.  As proposed, the standard will become effective for public companies in 2015, and private companies will have another year to follow-suit.  Track the FASB’s progress on the standard.