Since 2002, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working together to bring the guidance provided in the United States General Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) in closer alignment. Historically, the U.S. GAAP provided complex transaction and industry specific revenue recognition guidance. For example, U.S. GAAP consisted of various revenue recognition requirements for specific transactions and industries which resulted in differing revenue recognition practices for similar transactions.
On May 28, 2014, the FASB and the IASB issued converged guidance in Accounting Standards Update (ASU) 2014-09 and IFRS 15, Revenue from Contracts with Customers. The “objective of the new guidance is to establish the principles to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue from contracts with customers” (FASB, 2014). The new standards provide a principle-based approach to revenue recognition which is outlined in a five-step process (see graphic below).
Revenue Recognition Process
In response to the issuance of the new revenue recognition accounting standards, the American Institute of Certified Public Accountants (AICPA) brought together 16 industry-specific task forces to assist in the development of an accounting guide for revenue recognition. There are four task forces addressing hospitality-related businesses that fall into these categories: airlines, gaming, hospitality and timeshare. The following table provides an outline of revenue recognition implementation issues which have been identified by the corresponding industry task force, and are currently open for comment.
To view and make comments on these revenue recognition working drafts, please visit the following link and article from the Journal of Accountancy, a publication of the AICPA: Revenue Recognition Working Drafts Issued for 4 Industries.
For a complete listing of implementation issues being addressed by the AICPA Financial Reporting Executive Committee (FinREC) for the airlines, gaming, hospitality and timeshare industries visit the following task force websites:
- Gaming Entities Revenue Recognition Task Force
- Airlines Revenue Recognition Task Force
- Hospitality Entities Revenue Recognition Task Force
- Timeshare Entities Revenue Recognition Task Force
The new revenue recognition accounting standards will take effect in January 2018. For further information on the changes, visit the following links:
Tanya Venegas, MBA, MHM, CHIA is the executive director at the HFTP Americas Research Center at the Conrad N. Hilton College of Hotel and Restaurant Management at the University of Houston. Contact Tanya via email at firstname.lastname@example.org or via phone at 713-743-1839.