The outcome of the meetings is a re-energized FASRI with a slightly different focus, and a plan for building a stronger partnership between the academic community and those who are most actively involved with standard setting deliberations.

Our new mission emphasizes three objectives.  Our primary objective is to provide input from the academic community to the FASB on standard setting issues.  We pursue that objective through two supporting objectives:  informing the academic community about ongoing deliberations and research advances (updates), and growing the FASRI community by providing content that will help our academic colleagues succeed in the challenging career they have chosen (outreach).

Over the coming weeks you will see these changes reflected in the pages at the top of our website, and in the content of our blog posts.  We will be announcing our schedule of roundtables shortly as well.

Check back frequently, as we hope to have new posts on the site almost every day.  And if you are interested in getting involved, just send me an email.

Jeremy Bentley (& friend)

I just got off the phone (Skype, actually) with our new editorial assistant, Jeremy Bentley.  Jeremy is in BYU’s PhD-prep program, which has generated a number of successful accounting researchers.  Jeremy will be doing a little work behind the scenes, but his primary duty will be more visible:  to keep our blog on top of new developments in standard setting and financial reporting research.  So look for Jeremy’s posts, starting very soon.

The recent Financial Reporting Issues Conference clarified a number of normative questions that still need to be answered:

• What is the appropriate scope of the revenue recognition standard?  If certain commercial transactions or industries (like insurance or leasing) should be excluded from the scope of revenue recognition, on what basis?
• What are the best ways to distinguish ‘performance obligations’ from other liabilities?  The performance obligation is an obligation to the customer that, when satisfied, results in the recognition of revenue.   Must one identify obligations to customers without reference to management intent or the firm’s business model — and if so, how can that be done?
• How does one distinguish between the sale of a product and the delivery of a service?  This question is closely related to the boundary between the revenue recognition project and the leasing project.
• What is the best operational definition of ‘control’ — a critical issue, since a transfer of control satisfies the performance obligation and results in revenue?

These are just a few of the questions that occur to me, and I am sure other attendees are puzzling over many more.  We are looking for academics (individuals and teams) who are interested in identifying researchable positive questions that will help provide a basis for answering these normative questions.   (See here for my view on positive and normative research.)

Join us at 11am ET on Wednesday, December 09, as we discuss some takeaways from the conference and start a conversation about research directions for revenue recognition.

p.s.  A similar call for research on leasing will be issued soon.

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.

A FASRI Pollster

Click this link for a very short survey about FASRI’s Roundtables and Blog.  The fact that you are reading this means you are part of our sample universe.  It only takes a few minutes and will be a huge help.  Thanks!

A FASRI Pollster

Click this link for a very short survey about FASRI’s Roundtables and Blog.  The fact that you are reading this means you are part of our sample universe.  It only takes a few minutes and will be a huge help.  Thanks!

I’ll be the first to admit the challenges to working on academic research with FASB staff.  After all, our interests aren’t entirely aligned: while both academics and staff want to conduct research that can help FASB with its deliberations, academics also want their papers to end up in top-tier peer-reviewed outlets (e.g., The Accounting Review). Timing can also be a challenge, and there are circumstances where the pace of Board deliberations force us to ‘hurry up and wait.’

Despite the challenges, we have worked out a number of the kinks in this system.

Since I mentioned challenges above, let me also emphasize the two key benefits we enjoyed from working closely with staff:

• FASB was essential in securing the participation of 60 highly experienced credit analysts to devote 90 minutes to a very challenging task.
• FASB staff helped us identify specific questions that would be important in deliberations by the time our research would be complete.  From that set of questions, the academic researchers selected some that would also make contributions to extant literature.

Looking ahead, FASRI is likely to be targeting four projects:

• Revenue Recognition.  The FASB and IASB have issued Preliminary Views on Revenue Recognition in Contracts with Customers, and expect to publish an exposure draft in 2010.
• Disclosure Framework.  On July 8, 2009, the FASB chairman announced (press release) the addition of a new agenda project aimed at establishing an overarching framework intended to make financial statement disclosures more effective, coordinated, and less redundant.  The FASB has not published an expected data for a Discussion Paper or Exposure Draft.
• Leases.  The FASB and IASB have issued Leases:  Preliminary Views, and expects to publish an exposure draft in 2010.
• Measurement.  The FASB and IASB have addressed measurement issues in a number of standards and staff positions, and measurement remains a key topic in the revision of the Conceptual Framework.

We will be providing more info on all of these projects through our Round Tables; drop me an email if you are interesting in getting involved.

The FASB has approved an Editorial Assistant position for FASRI.net.  This highly visible job provides an excellent opportunity for someone who likes writing and is interested in policy-oriented accounting research.   While the details of the position will be open to modification, based on the interests of the applicant and the changing needs of FASRI, key duties will typically include:

• Moderation of comment threads, as needed and according to policies set by the Editorial Board;
• Writing of frequent (usually short) blog posts on topics relevant to our readership, under the guidance of the FASRI Director and Editorial Board.  Typical posts of this nature might consistent of a brief summary with links to news item from the financial press, FASB, IASB, SEC, or other such relevant sources, and/or pointers to new research papers;
• Posting of regular administrative items on the website, such as updating the Round Table calendar and posting Round Table announcements and archived videos when available;
• Assisting authors with blog posting as needed.

Applicants should send a letter of application, CV/resume, and two sample blog posts (using past FASRI.net content and Why a Blog? as guides) to Robert Bloomfield [rjb9 (at) cornell (dot) edu], FASRI Director, who will forward recommendations from the Editorial Board to the FASRI Oversight committee for approval.  Applications should demonstrate an interest in current standard setting issues and research, an ability to identify relevant content, strong writing skills, and a knowledge of (or an ability to learn) how to post and edit website content.   The Editorial Assistant will receive a stipend of $500 per month, paid at the end of each quarter.  Contact Rob Bloomfield for more information.  We hope to fill the position as soon as possible, so we are not posting a deadline; please feel free to send a preliminary email if you plan to submit an application.