The Financial Accounting Standards Board has spun up a new webpage to help companies prepare for a suite of changes to accounting standards that are set to go into effect in the coming years.
First among them is the revenue recognition standard, which, for public organizations, should be used for interim reporting periods within annual reporting beginning Dec. 15 of this year. According to the FASB rule, nonpublic organizations have an additional two years from that deadline to being applying the standard to interim reporting periods within annual reporting.
In addition to the online resources, which include implementation guides, links to resource groups and contacts that can field technical questions, FASB issued a video outlining their outreach to companies preparing for the transition.
New revenue recognition standards are expected to have a significant impact on how companies disclose what they earn. It’s an issue that even companies with massive accounting departments grapple with.
A letter dated June 19 but only made public this week from Walmart CFO M. Brett Biggs to the Securities and Exchange Commission indicated that the SEC had asked for more detail on how the company accounts for revenue from third-party sales.
In the letter, Walmart said “we are the agent and the third party is the principal in these transactions.” As such, the current rules only require Walmart to present that revenue in net sales in the company’s Consolidated Statements of Income.
But MarketWatch notes that could change when the new revenue recognition rules take effect. “Walmart could boost its top line, and its cost of sales, if it determines some third-party sales should be presented on a gross basis instead,” reports MarketWatch.
In addition to third-party sales, an area of Walmart’s business called “breakage revenue,” or the unredeemed portion of Walmart’s own gift cards, could also be impacted by the new revenue rules.