America's Internal Revenue Service (IRS) has issued a notice calling for public comment on a new tax standard, which has raised concern over the accrual method of accounting used by many larger companies, rather than the cash method.

The new revenue recognition standard, Revenue from Contracts with Customers, was announced by FASB and the International Accounting Standards Board in May 2014.

The main provision of the standard is a five-step process that requires a deeper level of analysis than most companies would be used to. Companies providing services or good will be required to:

• identify the contract with a customer;
• identify the separate performance obligations in the contract;
• determine the transaction price;
• allocate the transaction price to the separate performance obligations in the contract; and
• recognize revenue when or as it satisfies a performance obligation.

However, the IRS stated in its call for comment: “The new standards raise a number of substantive and procedural issues for the IRS, including whether the new standards are permissible methods of accounting for federal income tax purposes, the types of accounting method change requests that will result from adopting the new standards, and whether the current procedures for obtaining IRS consent to change a method of accounting are adequate to accommodate those requests.”

Comments are invited on issues of conformity between the new standards and the Code.