In preparation for the joint meeting with the FASB and future discussion on the topic, the Board held a preliminary discussion to clarify certain matters in advance of the joint meeting. Three main issues were discussed:
- Identification and initial measurement of performance obligations.
- Illustrative application examples for a range of revenue transactions.
- Definition of revenues.
The Board discussed the identification and initial measurement of performance obligations, including staff proposals to clarify the appropriate unit of account, the meaning of the term 'customer's reference market' and the definition of a performance obligation. The Board also discussed a proposed change in terminology - ceasing to use the term 'customer-based value' in favour of 'allocated consideration amount' when describing the measurement and measurement objective associated with using an allocation methodology.
The Board discussed various aspects of the measurement of stand-ready obligations. Board members expressed varying degrees of discomfort with the proposals, in particular the measurement of items using methods with few or no market inputs.
The staff noted that the IASB and the FASB were likely to reach different conclusions on the use of allocated customer amount and fair value when measuring unconditional stand ready obligations and that the staff proposal would be that the discussion document would include both alternatives.
The Board discussed several illustrative examples. Only a few comments were made.
Finally, the Board discussed the definition of revenue. Some Board members expressed concern that the proposed definition of revenue encompassed 'enhancement of assets', and that 'revenue' should arise only from actual sales; changes in the value assets were components of profit or loss, but were not 'revenue.'
No decisions were made. The Board will discuss this topic during the joint IASB-FASB meeting on 24/-5 October 2005.