The American Institute of CPAs has issued a new audit and accounting guide on the revenue recognition standard.
The online edition of the AICPA’s Audit & Accounting Guide on Revenue Recognition aims to help entities and auditors understand, implement and audit the converged standard released in 2014 by the Financial Accounting Standards Board and the International Accounting Standards Board. Public companies will need to start applying the standard to annual reporting periods beginning after Dec. 15, 2017 and private companies a year later.
Many companies are getting ready for the impending effective date, but a survey last October of public companies by PricewaterhouseCoopers and the Financial Executives Research Foundation found that 8 percent still had not begun an initial assessment of the new revenue recognition standard, while 75 percent were still assessing the standard. The AICPA and the Securities and Exchange Commission are encouraging companies to get ready for the standard.
The new AICPA guide summarizes accounting guidance on whether and when revenue should be recognized, identifies the circumstances and transactions that could signal improper revenue recognition, summarizes the main aspects of the auditor's responsibility to plan and conduct an audit under Generally Accepted Auditing Standards, describes procedures that auditors may find effective for limiting audit risk from improper revenue recognition, and describes audit challenges that could be caused by the revenue recognition standard changes.
The current edition also includes the accounting implications of adopting the revenue recognition standard for companies in the aerospace and defense and asset management industries. Future editions will discuss the accounting implications of other industry sectors as well. The Institute plans to update the online edition as additional accounting implementation issues are finalized.
“This is the first of our online editions on the topic and I anticipate many more updates covering industry-specific considerations in the coming months,” said AICPA FinREC chairman and Crowe Horwath partner James Dolinar in a statement.
The guide is a project of the Institute’s Financial Reporting Executive Committee, volunteers on its Revenue Recognition Working Group and 16 industry task forces, including the Auditing Revenue Task Force. The guidance within the industry chapters has been approved by FinREC members.