The lofty goal: To develop a single set of high-quality, international accounting standards that companies worldwide would use for both domestic and cross-border financial reporting.

Last month the FASB and IASB issued a progress report on their convergence projects. Although the boards have made a commitment to issue final standards for the items they consider to be most critical (financial instruments, revenue recognition, leases, fair value measurement and statement of comprehensive income), they have put four projects on hold—the most notable being the financial statement presentation project.

Exposure drafts have been issued for all of the priority projects, with revenue recognition currently getting the most attention. Why is this? Of the exposure drafts that have been issued this year as a part of the convergence effort, the proposed standard on revenue recognition from contracts with customers could arguably have the biggest impact on the most companies.

This exposure draft proposes a single principles-based model (we’ve heard it a million times—we’re getting away from a rules-based model!) under which revenue is recognized as the performance obligations in contracts are satisfied.  The obligations are deemed satisfied when control of the promised goods or services is transferred to the customer. The final standard would replace all existing guidance, including all industry-specific guidance. Thirty-six technology companies provided comment letters to the boards during the commenting period deadline. In general, they support the proposed single revenue recognition model.

The following concerns, however, were noted:

  • Recognizing revenue based on an estimated transaction price in a contract that has a variable transaction price may be difficult to apply in practice.
  • Including credit risk as a factor in measuring revenue does not seem appropriate.
  • Retrospective application is a huge undertaking, where the cost of tracking and reporting could outweigh the benefits (two-thirds of those who submitted comment letters disagreed with the full retrospective application of the standard!).

Last month the IASB and FASB held four public roundtable discussions, both in the United States and abroad, to further understand the concerns about the items presented in the exposure draft. We should expect a final standard on revenue recognition by June 30, 2011.

This seems like quite a task for the IASB and FASB to undertake, and there are four other areas for which final standards are due to be issued during 2011 (financial instruments, leases, fair value measurement and statement of comprehensive income). Will the two boards be able to compromise? Will they listen to the concerns of the public?  Will the convergence of the IASB and FASB be a perfect marriage?

Only time will tell! We’ll keep you posted.

This past fall I attended a panel discussion presented by the SEC Professionals Group on detailed XBRL tagging. Overall it was very helpful and provided great insight into what other companies experienced for their first experience with detailed tagging.

The incredible workload surprised all of the panel members, who were primarily SEC reporting managers and controllers from high-tech companies that were part of the Group One XBRL. This first group had to prepare detailed tagged financial statements and footnotes (versus block tagging), so the panel included some of the first companies who experienced the joys and the trauma of detailed XBRL tagging.

Common pain points for these companies: the huge volume of work involved in the detailed tagging (an average of ~250 hours in prep/review/validation) in addition to their normal filing process; incredibly long turnaround times for changes from the printers (six to seven days in some cases); many errors in tags chosen by the printers; and subpar quality on work outsourced by the printers.

The lessons learned reflect my own work with XBRL: start the process early, and leave plenty of time for review; don’t rely on printers’ accounting expertise (you know your financials and footnotes better than they do); the responsibility for the accuracy of the XBRL filing resides with you, not the printer; and have a really solid methodology for tracking changes. Finally, do a test run to make sure the results meet your expectations.

Keep these things in mind, and things will go a lot more smoothly.

The week before last I participated as a judge for the finalists in this year’s 2010 Cleantech Open national competition. At first, the daunting task of reading 18 business plans (20+ pages each) in less than one week had me asking myself “Why I am doing this?” But once I started to delve into the plans, it became incredibly interesting to read about the various ideas and technologies that some very bright people have been working on.

A little history—18 finalists competed in the following categories: energy efficiency, air, water and waste, renewable energy, transportation, smart power and green building. Competitors came from five regions in the United States: California, Northwest, Rocky Mountain, Northeast and North Central. Each company was allotted 15 minutes to present their pitch to the 12 judges. Judges were then allowed 15 minutes for questions and answers. Finally, the judges gave five minutes at most of feedback to each company regarding their presentation and business plan. Times were strictly adhered to due to the packed two-day schedule.

Judging the finalists was much more difficult than assessing the semifinalists. All contestants were well prepared. Several have already sold products to customers and were able to demonstrate their products to the judges, including the electric vehicle! Many had products that can be used by people in their day-to-day lives such as the water purifying system from Puralytics (winner of the contest) and the automatic tire inflation system from Pressure Sentinel.

The judges were amazing and represented a variety of companies and backgrounds, including investors (VC and corporate), attorneys, finance, banking and government. All had extensive experience in the cleantech arena and brought that depth of experience to the judging. Criteria in judging included the opportunity for significant business return; exciting, potentially disruptive or “game-changing” sizzle; and sustainability.

All in all, the two days were fun and well worth the time and effort in judging. Go to www.cleantechopen.com for a list of winners and more information about each of the finalists.