Comment Period Pays Off for Contractors

Peter Schubilske, CPA, Auditing & Accounting Senior Manager   email
June 2011

On June 24, 2010, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued an exposure draft for public comment on Revenue from Contracts with Customers. If adopted, the proposal would create a single revenue recognition standard for International Financial Reporting Standards (IFRs) and U.S. generally accepted accounting principles (GAAP). The proposal's purpose is to improve and align the financial reporting of revenue from contracts with customers and related costs by:   

• removing inconsistencies and weaknesses in existing revenue recognition standards and practices;
• providing a more robust framework for addressing revenue recognition issues;
• improving comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and
• simplifying the preparation of financial statements by reducing the number of requirements to which entities must refer.

These proposed changes caused many to ask questions. As a result, contractors and practitioners provided nearly 1,000 comment letters to FASB and IASB (the boards) during the comment period.

Since the close of the comment period, the boards have deliberated over the comments provided from across the country. During these deliberations the boards discussed all of the concerns and questions raised by the public and recognized that revisions needed to be made to the exposure draft.

On April 26, 2011, the revisions to the exposure draft were issued. For more detail on the exposure draft and the revisions that have been made click here.  This document compares the original and revised text in a format that outlines how to apply the proposed guidance to your business. 

The finalized draft of this new guidance is expected to be released in late 2011. As the new guidance will probably have a large impact on how contractors recognize revenue, it is imperative that you begin to understand the changes that are being made and think about how they will affect you and your business. If you have any questions on the new guidance or would like further assistance on the best way to implement these changes in your business, please contact Peter Schubilske at 262/754-9400.