The Financial Accounting Standards Research Initiative (FASRI) is issuing an open call for academic researchers to serve as Research Consultants for a Revenue Recognition Research Project.  Research consultants will work with members of FASRI to develop rigorous research studies likely to be helpful with the FASB and IASB deliberations on revenue recognition and related topics.  Benefits of working with the FASRI team include receiving (as appropriate) some or all of the following:  the opportunity to meet with experts from FASB and its constituents to help craft research questions and approaches; access to internal documents, personnel, advisors and constituents; assistance securing research participants; funding for research assistants, travel, the creation and development of stimuli, and human subject compensation.  Projects are expected to result in two documents: a research paper submitted to a peer-reviewed academic journal (such as The Accounting Review), and a report summarizing the research method and results for the FASB.  Consultants are expected to be listed authors on both documents. All research methods are acceptable, including (but not limited to) controlled experiments, surveys, field studies, structured interviews, theoretical studies, lexical analyses, and econometric analyses of publicly available data.

RESEARCH DIRECTIONS
The FASB and IASB have issued Preliminary Views on Revenue Recognition in Contracts with Customers, and expect to publish an exposure draft in 2010.   The revenue recognition model proposed in the document differs from current practice in several ways:  by applying a different model for recognizing and measuring revenue; by applying that model across all industries, rather than providing industry-specific models; and by relying on general principles, rather than detailed rules.  These differences provide opportunities on both the substance of revenue recognition models, and on the guidance for implementation that would need to be provided along with general principles-based standards.

Research on Revenue Recognition Models

A 2003 report by FASB Staff identified four ‘conventions’ appearing in revenue recognition guidance, each basing revenue recognition and measurement on different events:  changes in fair values of assets and liabilities; proportionate performance of production or service; sale and delivery of assets; and collection of proceeds from customers after performance has occurred.   The Preliminary Views propose a model relying heavily on the sale and delivery of assets to customers as part of an enforceable contract.  The proposed model could substantially delay revenue recognition in long-term construction (which can currently recognize revenue for proportionate performance).

Research could examine the decision-usefulness of the proposed model relative to existing practice, especially in industries that are most affected by the proposed changes.  Such research might include:

  • Experiments assessing financial statement users’ judgments and decisions
  • Surveys examining how expert assessments of appropriate accounting vary across circumstances that are presumed to create the current variation in practice across industries (such as the reliability of fair value estimates, and the timing and certainty of cash inflows and outflows before and after transfer).
  • Archival studies examining the variations in the predictive power and value relevance of reported revenue across industries, countries and/or time periods.

All of these studies are likely to be most useful if independent variables can be clearly related to the variables underlying the four revenue recognition conventions (such as market prices, production, cash expenditures and cash collections), as well as variables that play key roles in the proposed model (such as the presence of an enforceable contract and factors indicating a transfer of control).   Such studies might help the FASB determine whether the scope of the general revenue recognition model must be narrowed to exclude certain types of business and transactions.

Research on Implementation Guidance
The FASB also faces challenges in determining what type of implementation guidance to provide as part of any update to revenue recognition standards.  Currently, practitioners can find extensive guidance on revenue recognition in the Accounting Standards Codification (originally developed in Statements of Financial Accounting Standards, FASB Staff Positions, FASB Technical Bulletins, FASB Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position, and in AICPA and AcSEC Practice Bulletins).  As it prepares to base revenue recognition on a broad model that spans all industries, and replace rules with principles, the FASB could benefit from better understanding how existing guidance is being used, and how new and existing guidance would be used after the passage of a principles-based standard. Research might include:

  • Experiments examining how new and existing guidance would be used in different circumstances
  • Surveys examining how existing guidance is currently used in different countries and industries
  • Archival studies examining the factors that lead to the generation of implementation guidance and rules that clarify principles-based standards


APPLICATION PROCESS

Applicants should submit a letter of interest, along with a CV, to Jeffrey Wilks (FASRI Revenue Recognition Research Coordinator), Robert Bloomfield (FASRI Director) or Jeffrey Hales (FASB Research Fellow) no later than January 4th, 2010.  The letter should demonstrate that the applicant, individually or as part of a team, possesses the research expertise needed to conduct and oversee research of sufficient quality to warrant publication in a peer-reviewed academic outlet, and is willing and able to work with FASRI staff to revise and refine their questions as necessary, as issues under deliberation are clarified.  Evidence of progress on particular research questions on revenue recognition (as described above) is helpful, but not necessary.  The letter should be no more than two pages in length.  Letters will be reviewed by Wilks, Bloomfield, and Hales, with input from the FASRI Editorial Board and FASB staff members from the standard setting project(s) being targeted in the proposal.  The Editorial Board consists of Professors Robert Bloomfield, Jeffrey Hales, Lisa Koonce, Robert Lipe, Ray Pfeiffer and Jeff Wilks.

Researchers are welcome to apply as research teams or as individuals.  At least one member of each team must be employed as a faculty member at an institution accredited by the AACSB or an international equivalent.  Successful applicants will be expected to travel to FASB offices in Norwalk, CT as appropriate.  However, there is no expectation that consulting duties will impinge on time devoted to their current institution any more than other ambitious research projects.

MORE INFORMATION
Potential applicants can find more information from the FASRI website, and from FASRI Round Tables focusing on the targeted FASB projects described above.  Featured speakers have and will include FASB project managers, FASB and IASB constituents, and leading academic researchers. Applicants are strongly encouraged to participate in Round Table discussions on the topic prior to submitting a letter of interest.  These discussions will help in identifying key issues of interest to current standard setting deliberations, and clarifying both the opportunities and the challenges of conducting research in concert with the FASB.  Researchers seeking more information should contact FASRI Director, Professor Robert Bloomfield, Cornell University (rjb9 at cornell.edu) and/or the FASB Research Fellow, Professor Jeffrey Hales, Georgia Institute of Technology (jwhales at fasb.org).

TERMS AND CONDITIONS
At the conclusion of the project, research consultants will submit a report informing the Board about the nature and outcome of the research.  Researchers and research teams will also be strongly encouraged to write their own independent articles for submission to peer-reviewed academic outlets.  We anticipate that researchers will retain complete intellectual property rights over the output of any research they conduct in the capacity of a research consultant, including survey or experimental stimuli created for experiments or surveys, data collected, or other documents.  However, consultants are not permitted to disclose any documents or communications received from FASB employees, unless those are already in the public record, or the researcher has obtained explicit consent allowing disclosure.