The amendments, which are being proposed in response to feedback received by the FASB–IASB joint revenue recognition transition resource group (TRG), include the following:
- Collectibility and contract termination — The term “contract termination” would be clarified with respect to determining when an entity would recognize as revenue consideration it receives if the entity concludes that collectibility is not probable.
- Presentation of sales tax collected from customers — A practical expedient would be added to allow entities to present revenue net of sales taxes collected on behalf of governmental authorities (i.e., to exclude sales taxes that meet certain criteria from the transaction price).
- Noncash consideration — In determining the transaction price for contracts containing noncash consideration, an entity would include the fair value of the noncash consideration to be received as of the contract inception date. Further, subsequent changes in the fair value of noncash consideration after contract inception would be subject to the variable consideration constraint only if the fair value varies for reasons other than its form.
- Contract modifications at transition — The proposal would add a practical expedient that would permit entities to allocate the transaction price of the contract to all satisfied and unsatisfied performance obligations, thereby relieving them of the need to evaluate the effects of each contract modification that occurred before the initial adoption of the new revenue standard.
- Transition technical correction — Entities that elect to use the full retrospective transition method to adopt the new revenue standard would no longer be required to disclose the effect of the change in accounting principle on the period of adoption (as is currently required by ASC 250-10-50-1(b)(2)3); however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted.
The proposed ASU’s effective date and transition provisions would be aligned with the requirements of ASU 2014-09, which, once finalized, will be deferred by one year.
Comments on the proposed ASU are due by November 16, 2015.
In July 2015, the IASB issued an ED proposing similar clarifications to its new revenue standard, IFRS 15, Revenue From Contracts With Customers. The FASB’s proposed ASU states:
The amendments in this proposed Update are not identical to those proposed by the IASB, and some are incremental to the amendments proposed by the IASB. The FASB expects that the amendments in this proposed Update would not result in financial reporting outcomes that are significantly different from those reported under IFRS for similar transactions.
For more information, see Deloitte's related Heads Up newsletter and the press release and proposed ASU on the FASB’s Web site.