NASBP and CFMA Joint Comments on FASB/IASB Re-exposed Proposed Revenue Recognition Standard

The National Association of Surety Bond Producers (NASBP) took a keen interest in the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) proposed new standards for revenue recognition, which the boards published in an Exposure Draft in June 2010. In response to that Exposure Draft, NASBP sent a comment letter urging the boards to consider preserving in the new standard the tenets of ASC 605-35, formally known as SOP 81-1, which represents the Percentage of Completion Method (PCM) currently implemented in revenue recognition for most construction firms.

Most recently, NASBP participated in the CFMA committee process of formulating comments on the FASB re-exposed proposal for the revenue recognition standard. NASBP member Darrin Weber, CPA, CIC, of IMA, Inc. in Dallas, TX, represented NASBP and provided the perspectives of bond producers in that process. The comments that CFMA provided March 13, 2012 to FASB include NASBP perspectives and input. NASBP and CFMA agreed that it would be more effective to communicate their concerns and comments to FASB in one comment letter. To view those comments, click here. To access FASB’s revised Exposure Draft on Revenue Recognition, click here.

The NASBP Industry Relations Committee and NASBP would like to thank Weber for his time and effort to assure that NASBP and NASBP bond producers’ perspectives have been provided to FASB. For more information on the Revenue Recognition Proposal and NASBP’s activity on the issue, click here. FASB and IASB have made no announcement indicating when the final revised standard would go into effect now that this proposal has been re-exposed.

Background

The proposed standards were FASB’s and IASB’s efforts to reconcile and converge disparate accounting standards and practices on revenue recognition. The June 2010 proposed rules had significant implications for construction firms, because they recognized revenue at the performance obligation level, a departure from the approach of the percentage completion method, which has long-prevailed in and is grounded in the realities of the construction industry for the past 20 years. Originally, FASB/IASB planned to publish the final revised standard in June 2011, but rethought that plan and instead re-exposed its Revenue Recognition Standard proposal with changes made based on comments received from several industries including the construction and surety industries. The boards re-exposed the proposed standard in November 2011 and required comments by March 13, 2012. The comments that CFMA provided March 13, 2012 to FASB include NASBP perspectives and input.