The Internal Revenue Service has released a new revenue procedure that provides a new automatic way that companies can use when changing their accounting method to conform to the Financial Accounting Standards Board’s new revenue recognition standard.
In Revenue Procedure 2018-29, the IRS noted that under the new FASB standard, an entity must recognize revenue, for financial statement purposes, for goods and services promised to customers in an amount that reflects what the entity expects to receive in exchange for those goods and services.
The revenue procedure the IRS issued Thursday modifies an earlier one from last year, Rev. Proc. 2017-30, to provide procedures for obtaining automatic consent from the IRS for the change in accounting method. The revenue procedure provides new procedures for taxpayers changing their method of accounting for the recognition of income for federal income tax purposes to a method for recognizing revenues described in the new financial accounting standards issued by FASB and the International Accounting Standards Board.
Companies will be able to change to an otherwise permissible method of accounting that uses the new rev rec standard to identify performance obligations, allocate transaction prices to performance obligations, and consider performance obligations satisfied, if the method change is made for the taxable year in which the taxpayer adopts the new standards.
The new revenue procedure doesn’t provide guidance, though, relating to some amendments in the new tax reform law. The Treasury Department and the IRS are preparing additional guidance to address those amendments.