* Rule presents changes for telecoms, software, real estate
* IT systems, other processes will have to change
* Latest example of standard setters aligning rules
By Huw Jones
LONDON, May 28 Investors will be able to compare
more easily from 2017 how much companies from all parts of the
world earn under the first common global revenue rule published
Revenue is one of the most important lines in a company's
accounts and a key benchmark for deciding on mergers and
acquisitions, but different accounting rules in the United
States and the rest of the world make company comparisons
The Financial Accounting Standards Board (FASB) which writes
book-keeping rules in the United States, and the International
Accounting Standards Board (IASB), whose rules are used in over
100 countries spanning Europe, Asia and parts of the Americas,
have taken years to thrash out the common approach.
The IASB's current rule lacks detail on when revenue should
be booked - when a sale is agreed or when payment is made -
while critics say the U.S. rule is too prescriptive.
"The revenue recognition standard represents a milestone in
our efforts to improve and converge one of the most important
areas of financial reporting," FASB Chairman Russell Golden
Accountants say companies using IASB rules will feel the
biggest impact as they have had little guidance on how to book
revenue from sales that combine different elements such as a
product and back-up servicing.
Many businesses will have to change their IT systems,
internal controls and even when bonuses are awarded.
It will particularly affect telecom, software, outsourcing,
life science and construction, forcing them to estimate some of
the revenue when a product is sold and book the rest over the
course of linked servicing contracts.
"For some of these companies, the change may present a
formidable logistical challenge," said Nigel Sleigh-Johnson,
head of the reporting faculty at ICAEW, an accounting body.
"This will involve assessing the impact of the standard on
all the company's revenue streams and determining what customers
pay for each element of goods and services sold as packages.
This can be a complicated task," Sleigh-Johnson said.
Brian Marshall, a partner at accounting firm McGladrey in
Stamford, Connecticut, said U.S. companies in industries such as
software may like the change because they consider the current
revenue rule overly restrictive.
The rule takes effect from 2017 but U.S. companies will have
to show its impact in 2015 and 2016 under a U.S. law that
requires two comparison years ahead of accounting changes.
The reform is part of an effort by the two standard setters
to align their rules to make capital markets more efficient, as
called for by leaders of the Group of Twenty (G20) economies.
Disagreements remain, with the two boards unable to agree a
single rule forcing banks to make provisions for souring loans
earlier. They are also set to differ over accounting at
(Additional reporting by Dena Aubin in New York; editing by Tom