Financial Accounting Standards Research Initiative

I was excited this past week to read that the IASB recently published a second exposure draft on a portion of IAS 37 Provisions, Contingent Liabilities, and Contingent Assets. I know, excitement might be too strong of a word, but I was looking forward to seeing whether the IASB’s decision on how to measure onerous [...] Read more > >

I’ve been thinking about something Jeff Wilks said during this week’s FASRI Roundtable and something that occurred to me during the conference.  In short, it is the notion that it might be useful to consider perspectives other than the customer consideration model for revenue recognition.  (Forgive me, Jeff, if I misunderstood your comments Wednesday, and of [...] Read more > >

How often do we get to use big esoteric words from philosophy when we are talking about accounting standards?  Not often enough! Usually, the only philosophical terms we use are ‘normative’ and ‘positive,’ and I think many of us are pretty comfortable with the notion that standard setters are trying to answer normative questions (what should [...] Read more > >

Are you comfortable with allowing management to choose whether to recognize unrealized gains or losses based on management’s intent to hold securities to maturity?  How about basing the timing of revenue recognition on the firm’s business model?  Differences in intent and business models might very well alter what information users find relevant.  However, intent and [...] Read more > >

One issue that came up repeatedly for me at this weekend’s FASB-IASB reporting issues conference was that of the apparent clash between the objective to provide relevant information through financial reports and the objective to maintain consistency with the conceptual framework’s definitions of assets and liabilities. An example illustrates the nature of the problem: consider a [...] Read more > >

As posted here, FASRI is issuing a call for research consultants to conduct revenue recognition studies.  This call is a little different from the usual ‘call for proposals’ because applicants must be willing to work closely with FASRI and FASB staff to identify research topics that will be most helpful in staff and Board deliberations.   [...] Read more > >

The Financial Accounting Standards Research Initiative (FASRI) is issuing an open call for academic researchers to serve as Research Consultants for a Revenue Recognition Research Project.  Research consultants will work with members of FASRI to develop rigorous research studies likely to be helpful with the FASB and IASB deliberations on revenue recognition and related topics.  [...] Read more > >

For most of this decade, the Financial Reporting Issues Conference has been my favorite accounting event of the year.  Taking a Bayesian perspective, I also view it as the most informative:  every year, what I learn changes my beliefs more than any other conference. I will be writing some posts about the substance of the conference, [...] Read more > >

It was great to have Stephen Penman participate in our round table discussion this past week. It is worthwhile to listen to someone else’s views on standard setting, particularly when those views have been somewhat critical of the current state of standard setting. Although I still have many questions about the completeness of Stephen’s framework [...] Read more > >

In their joint meeting in Norwalk, Connecticut last month, the IASB and FASB affirmed an earlier decision that an “insurer should recognize all acquisition costs as an expense when incurred.  In addition, both Boards agreed that the insurer should not recognize a part of the premium as revenue (or income) at inception equal to the [...] Read more > >

In their joint meeting in Norwalk, Connecticut this past week, the IASB and FASB reached the tentative conclusion that lessors will no longer derecognize leased assets. Instead, lessors will recognize a receivable and a performance obligation with revenue being recognized over time. Some think this approach is more consistent with the proposed new revenue recognition [...] Read more > >

On Tuesday, Oct 20th, 4 pm ET, we will be joined by Bin Ke (Penn State University).  Bin will be discussing his recent paper, entitled “Why do cross-listed firms voluntarily adopt Regulation Fair Disclosure?” The paper is co-authored with Michael Crawley and Yong Yu, both of whom are from the University of Texas at Austin. The abstract [...] Read more > >

A student of mine brought to my attention an article in the Wall Street Journal September 24, 2009, “Investors Should Focus on Apple’s Core.”  In that article, Martin Peers points out that existing guidance for firms who have products that combine hardware and software, like Apple’s iPhone, required firms to obtain specific evidence about the [...] Read more > >

I’ve heard some people express the opinion that the FASB’s recent emphasis on an asset-liability approach is just a thinly veiled attempt to move financial reporting more in the direction of fair values. Ignoring the fact that the primacy of assets and liabilities is as old as the conceptual framework itself, I think recent evidence [...] Read more > >

"Libby Boxes" Revenue recognition is one of FASRI’s key target areas for research over the coming year.   We are going to take a big step forward on Tuesday, October 6th, 4pm by laying out some possible approaches to research studies on RevRec.  We will be structuring our discussion around the key independent variables that researchers might [...] Read more > >

Are you ready for earlier revenue recognition (and more estimation)?  The FASB approved an EITF consensus (issue 08-1) this week in which the EITF dropped one of the key requirements that often precluded revenue recognition for delivered items in a multiple-element arrangement (think Apple and iPhones). In current accounting standards (EITF 00-21 or FASB Accounting [...] Read more > >

#gallery-1 { margin: auto; } #gallery-1 .gallery-item { float: left; margin-top: 10px; text-align: center; width: 33%; } #gallery-1 img { border: 2px solid #cfcfcf; } #gallery-1 .gallery-caption { margin-left: 0; } On Wednesday, September 16th, 11 am ET, Dain Donelson, Ross Jennings, and John McInnis, all of the University of Texas at Austin, will join us to discuss their recent paper entitled “Changes over Time in the Revenue-Expense Relation: Accounting [...] Read more > >

On Tuesday, August 25th, 4 pm ET, we will be joined by Ted Christensen and Jeff Wilks (both of Brigham Young University) as we discuss the FASB and IASB’s proposed changes to revenue recognition. As you may know, Jeff played a significant role in the FASB/IASB joint project on revenue recognition during his time as an [...] Read more > >

The comment letter deadline for the IASB/FASB discussion paper on revenue recognition was June 19, 2009. The staff recently presented a high-level summary of the 200+ comment letters received by the boards. Given my recent posts (July 30 and Aug. 11) on the AAA FASC’s comment letter, I thought it might be useful to consider [...] Read more > >

So far, no one has responded to my questions about the importance of contracts for revenue recognition. So, let me venture to ask a few more questions that occurred to me while reading the FASC’s comment letter on the revenue recognition discussion paper. In their response to Q9, the authors state: The traditional “income statement” approach suggests [...] Read more > >

The AAA Financial Accounting Standards Committee (FASC) recently submitted a comment letter in response to the FASB/IASB’s discussion paper on revenue recognition. This letter is unusual because it is one of few (if any others) that draw on existing academic research to support its arguments. In that regard, the FASC has provided a useful service [...] Read more > >

We had an excellent discussion today with Bob Laux of Microsoft. Whether you are looking for research topics or good stories for your students–financial or managerial–you will find this a very interesting discussion. You can now watch the archive live by going here, waiting through a 15 second commercial, and then clicking the [...] Read more > >

Details on participation are here. On Wednesday, July 22nd, 11am ET, we will get a preparer’s perspective on the state and future of financial reporting standards from Bob Laux, Senior Director of Financial Accounting and Reporting at Microsoft.  Mr. Laux is responsible for Microsoft’s financial accounting, including  responding to GAAP questions and issues within Microsoft and [...] Read more > >

In reading the FASB’s Discussion Paper on Revenue Recognition with Contracts with Customers, what immediately stands out is the intended breadth of the proposed model.  The Discussion Paper states that the model would apply to “all contracts with customers”, with contract being very broadly defined, although still consistent with IASB and commonly used US legal [...] Read more > >

Anup Srivastava (Northwestern) presented a research paper at today’s FASRI Office Hours. In this post, I briefly recap the takeaways from the paper and some of the questions that were asked by participants in today’s office hours. Anup’s paper examines how the constraints on revenue recognition imposed by SOP 97-2 Software Revenue Recognition affect the informativeness [...] Read more > >

Anup Srivastava (Northwestern) will join us to lead a discussion on revenue recognition on Wednesday, April 29th at 11am ET. Anup has a working paper that looks at firms who can exercise discretion over intertemporal allocations of revenue recognition, and in examining reactions to SOP 97-2, finds that firms use discretion to convey information, rather than [...] Read more > >

During FASB Research Office Hours on Tuesday, March 10, Leslie Seidman, FASB Board member, suggested the following questions as being of interest to the FASB regarding fair value measurement for liabilities. I believe that these questions are interesting and potentially addressable from multiple research perspectives. Moreover, I believe that work on these questions has the [...] Read more > >