It is probably time to cease referring to the Financial Accounting Standards Board’s (FASB’s) revenue recognition standard, one of FASB’s major standards, as “new,” given it was issued three years ago in May 2014. FASB purposely provided a lengthy implementation period, but the effective date is just around the corner. For financial institutions that are public business entities (PBEs), the standard becomes effective for annual reporting periods beginning after Dec. 15, 2017 – which means Jan. 1, 2018, for calendar year-ends. Financial institutions that are not PBEs have more time; for them, the standard is effective for annual reporting periods beginning after Dec. 15, 2018.
Wholesale changes are not expected for the financial institution industry, given that most financial instruments (including debt securities, loans, and derivatives) are not in the scope. However, some effort for financial institutions is required. In some cases, how revenue is recognized will change. In other cases, new disclosures will be required. As such, it is important to evaluate all revenue streams, especially noninterest income. It is also important to consider any needed changes to internal controls over financial reporting to evaluate revenue going forward.