Newspaper article THE JOURNAL RECORD

Changing Revenue Accounting Standards Could Complicate Reporting

Newspaper article THE JOURNAL RECORD

Changing Revenue Accounting Standards Could Complicate Reporting

Article excerpt

TULSA - Changing revenue accounting standards could spur surprising financial reporting changes, according to Wednesday presentations at the University of Tulsa's 69th-annual Conference of Accountants.

But implementation still lies at least one year down the road, Ernst & Young Senior Manager James Bowie told the TU Collins College of Business audience at the university's Lorton Performance Center.

Representatives of the International Accounting Standards Board and the Financial Accounting Standards Board reached initial agreement last year on revenue reporting changes, FASB Special Adviser James J. Leisenring said Wednesday. But he suggested much work remained to be done before actual standards would be reached.

Bowie, who works in Ernst & Young's assurance practice, said negotiators had agreed to a one-year delay before implementing the changes, with many issues remaining to be worked out.

The proposed standards also open up a number of interpretive issues over how revenue is defined and calculated, Bowie said.

In their current form, Bowie said, the new standards would apply a five-step model to define revenue. These would establish the nature of the business contract with the consumer, what the business promised to deliver to the customer, what the customer pays, how the business delivers and how the business recognizes revenue.

"On its face, it makes sense," Bowie said. "But with each step, complications arise. In some cases the steps depend on each other."

It also raises some yet-unanswered questions concerning familiar business practices such as leases, derivatives and conveyances. Bowie said energy companies in particular may face some interesting applications.

While the concept of identifying a contract remains fairly standard, Bowie said the rules bring potential change in reviewing what's enforceable, as well as collectability options. …

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