“The short answer is that over the past decade, FASB and ISAB have been working towards a goal of eliminating the variety of differences between US GAAP and IFRS,” Tamvaklis said.
This new standard will go into effect for publicly traded companies in reporting periods that begin after December 15th, 2017. Non-public companies will get an extra year to prepare. Tamvaklis says one of the biggest changes people will notice is that the new standard is more principles based than what we’re used to in the United States. Ours is a more rules-based system. That means more judgement will have to be applied with the new standard.
There are five steps in this new Revenue Recognition process:
Identify the contract with a customer
Identify performance obligations in the contract
Determine the transaction price
Allocate the transaction price
Recognize revenue when, or as, the company satisfies a performance obligation