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Revenue recognition

Date recorded:

The staff presented the Boards with a summary of the feedback received on the revenue project’s revised exposure draft (issued in November 2011) and an outline of the proposed plan to finalise the revenue standard.

Specifically, the IASB and FASB staffs summarised three papers that were provided to the Boards

  1. feedback from comment letters and outreach
  2. a summary of the staffs’ outreach activities
  3. the staffs’ project plan for redeliberations.

(The staffs’ papers can be found at http://www.ifrs.org/Meetings/IASB+May+2012.htm)  The Boards were not asked to come to any decisions during this session.

The staff highlighted that the majority of respondents were supportive of the project and the overall model; however, many provided detailed comments on the questions asked by the Boards and additional comments on other aspects of the model.  The IASB and FASB staffs categorised the areas of frequent comment within three buckets and provided a preliminary plan for redeliberating each area. The following table is an excerpt from FASB paper 160A/IASB paper 7A summarising the categories and the related comments:

  1. Core issues that could affect the framework for the recognition and measurement of revenue:
    1. Performance obligations satisfied over time (paragraphs 21-37) and measures of progress (paragraphs 38-43)
    2. Identifying separate performance obligations (paragraphs 44-49)
    3. Constraining the cumulative amount of revenue recognised (paragraphs 50-63)
    4. Accounting for customer credit risk (paragraphs 64-73)
    5. Time value of money (paragraphs 74-79)
  2. Other core proposals in the exposure draft:
    1. Onerous performance obligations (paragraphs 80-90)
    2. Interim and annual disclosures (paragraphs 91-104)
    3. Transition (paragraphs 105-111)
  3. Discrete issues that affect only some types of transactions of industries:
    1. Scope of the proposals (paragraphs 112-117)
    2. Contract issues (paragraphs 118-131)
    3. Allocation of the transaction price (paragraphs 132-143)
    4. Contract acquisition costs (paragraphs 144-146)
    5. Licenses (paragraphs 147-152)
    6. Other specific comments (paragraphs 153-154)
    7. Consequential amendments (paragraphs 155-165)
      1. Transfers of non-financial assets (paragraphs 155-158)
      2. Other consequential amendments (paragraphs 159-165)

The staff’s plan indicates that the boards’ redeliberations should be substantially complete by the end of 2012.  The plan also suggests a final revenue standard should be issued early in 2013.  However, it was noted that the plan is meant to be dynamic and will continue to evolve as the redeliberations progress.

Many of the Board members raised concerns about the timeline and whether it was achievable or whether it was too aggressive.  The concerns focused on the fact that each topic for discussion was only allocated a single meeting on the schedule so there was not much flexibility for allowing for additional discussions or follow-ups at later meetings.  Often times, topics are brought back at subsequent meetings after more analysis or outreach has been performed.  Further, based on the staffs’ plan, outreach and focused sessions are expected to continue during the redeliberations (specifically as it relates to preparers and users on the topics of transition and disclosures).  Board members asked that the staffs to consider these factors as the redeliberations get underway and as they are finalising the timeline for redeliberations.

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