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April 2016

FASB clarifies guidance on licensing and identifying performance obligations

Apr 14, 2016

On April 14, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-10 'Identifying Performance Obligations and Licensing', which amends certain aspects of the Board’s new revenue standard, ASU 2014-09 'Revenue From Contracts With Customers'.

Earlier this week, the IASB issued Clarifications to IFRS 15 that address (1) identifying performance obligations, (2) principal-versus-agent considerations, and (3) licensing. The clarifications also provide some transition relief for modified contracts and completed contracts.

The following table compares selected amendments from the FASB’s guidance on identifying performance obligations and its licensing implementation guidance under ASU 2016-10 with the IASB’s guidance as a result of its recently issued clarifications to IFRS 15:

Identifying Performance Obligations
TopicFASB’s GuidanceIASB’s GuidanceComparison
Immaterial promised goods or services An entity is permitted to evaluate the materiality of promises at the contract level; if the promises are immaterial, the entity does not need to evaluate such promises further. No changes to IFRS 15. The ASU clarifies but does not change the revenue standard’s guidance; therefore, divergence is not expected.
Shipping and handling activities Clarifies that shipping and handling activities that occur before control is transferred to the customer are fulfillment costs. Allows entities to elect an accounting policy to treat shipping and handling activities as fulfillment costs if they occur after control is transferred. No similar policy choice is available for shipping and handling activities after control is transferred. The decision to not allow a policy election will result in divergence. Entities that adopt IFRSs will need to determine whether shipping and handling after control has transferred is a performance obligation.
Identifying when promises represent performance obligations Reframes the separation criteria to focus on a bundle of goods or services. Adds illustrative examples. Same as FASB’s guidance. Continued convergence is expected.
Licensing Implementation Guidance
TopicFASB’s GuidanceIASB’s GuidanceComparison
Determining the nature of an entity’s promise in granting a license Requires an entity to characterize the nature of a license as either functional or symbolic.

Clarifies the assessment of whether an entity's activities significantly change the license intellectual property (IP) to which the customer has rights to.

The decisions are different and may result in divergence. Although the accounting for many licenses will be similar under both U.S. GAAP and IFRSs, some licenses may be accounted for differently.
Sales-based and usage-based royalties Clarifies that rather than splitting a royalty (and applying both the royalty and general constraints to it), an entity would apply the royalty constraint if the license is the predominant feature to which the royalty is related. Same as FASB’s guidance. The decisions are the same; continued convergence is expected.

The ASU’s effective date and transition provisions are aligned with the requirements in the new revenue standard, which is not yet effective. For more information, see the ASU on the FASB’s website. Do not miss our Deloitte’s Heads Up newsletter on this topic.

IASB publishes clarifications to IFRS 15

Apr 12, 2016

On April 12, 2016, the International Accounting Standards Board (IASB) published final clarifications to IFRS 15 'Revenue from Contracts with Customers'. The amendments are effective for annual reporting periods beginning on or after January 1, 2018 (same effective date as IFRS 15 itself). Earlier application is permitted.


On May 28, 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. After issuing the new revenue standard, which is sub­stan­tially the same as the FASB's ASU 2014-09, the IASB and the FASB formed the joint Revenue Tran­si­tion Resource Group (TRG) to support the im­ple­men­ta­tion of the new standard. The sub­stan­tial majority of the issues discussed by the TRG were resolved without the need for stan­dard-set­ting activity. However, five topics (iden­ti­fy­ing per­for­mance oblig­a­tions, principal versus agent con­sid­er­a­tions, licensing, col­lec­tabil­ity, and measuring non-cash con­sid­er­a­tion) were iden­ti­fied as requiring con­sid­er­a­tion by the Boards. In addition, some stake­hold­ers asked for practical ex­pe­di­ents. After con­sid­er­ing the five topics and possible practical ex­pe­di­ents, the IASB proposed in July 2015 targeted amend­ments in three areas of IFRS 15 as well as some tran­si­tion relief. The proposals in the exposure draft have now been finalized.


The amend­ments in Clar­i­fi­ca­tions to IFRS 15 address three of the five topics iden­ti­fied (iden­ti­fy­ing per­for­mance oblig­a­tions, principal versus agent con­sid­er­a­tions, and licensing) and provide some tran­si­tion relief for modified contracts and completed contracts. The IASB concluded that it was not necessary to amend IFRS 15 with respect to col­lec­tabil­ity or measuring non-cash con­sid­er­a­tion. In all its decisions, the IASB con­sid­ered the need to balance helping entities with im­ple­ment­ing IFRS 15 and not dis­rupt­ing the im­ple­men­ta­tion process.

Iden­ti­fy­ing per­for­mance oblig­a­tions. IFRS 15 requires an entity to identify per­for­mance oblig­a­tions on the basis of distinct promised goods or services. To clarify the concept of 'distinct', the IASB has added the clar­i­fi­ca­tion that the objective of the as­sess­ment of a promise to transfer goods or services to a customer is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services in­di­vid­u­ally or, instead, to transfer a combined item or items to which the promised goods or services are inputs.

Principal versus agent con­sid­er­a­tions. When another party is involved in providing goods or services to a customer, IFRS 15 requires an entity to determine whether it is the principal in the trans­ac­tion or the agent on the basis of whether it controls the goods or services before they are trans­ferred to the customer. To clarify how to assess control, the IASB has amended and extended the ap­pli­ca­tion guidance on this issue, and es­pe­cially stresses:

  • that an entity de­ter­mines whether it is a principal or an agent for each specified good or service promised to the customer and could be a principal for some specified goods or services and an agent for others;
  • that the in­di­ca­tors provided for assessing control are not a con­clu­sive list; and
  • that the in­di­ca­tors provided may be more or less relevant to the as­sess­ment of control depending on the nature of the specified good or service and the terms and con­di­tions of the contract so that different in­di­ca­tors may provide more con­vinc­ing evidence in some contracts than others.

Licensing. When an entity grants a license to a customer that is distinct from other promised goods or services, the entity has to determine whether the license is trans­ferred at a point in time or over time on the basis of whether the contract requires the entity to undertake ac­tiv­i­ties that sig­nif­i­cantly affect the in­tel­lec­tual property to which the customer has rights. To clarify when an entity's ac­tiv­i­ties sig­nif­i­cantly affect the in­tel­lec­tual property, the IASB has amended the ap­pli­ca­tion guidance and stresses that the ac­tiv­i­ties sig­nif­i­cantly affect the in­tel­lec­tual property if:

  • the ac­tiv­i­ties are expected to sig­nif­i­cantly change the form or the func­tion­al­ity of the in­tel­lec­tual property; or
  • the ability of the customer to obtain benefit from the in­tel­lec­tual property is sub­stan­tially derived from, or dependent upon, those ac­tiv­i­ties.

Ad­di­tion­ally, the IASB has extended the ap­pli­ca­tion guidance with respect to the ap­pli­ca­tion of the royalties con­straint.

Tran­si­tion relief. The IASB has provided two ad­di­tional practical ex­pe­di­ents (both optional):

  • An entity need not restate contracts that are completed contracts at the beginning of the earliest period presented (for entities that using the full ret­ro­spec­tive method only)
  • For contracts that were modified before the beginning of the earliest period presented, an entity need not ret­ro­spec­tively restate the contract for those contract mod­i­fi­ca­tions but shall instead reflect the aggregate effect of all of the mod­i­fi­ca­tions that occur before the beginning of the earliest period presented (also for entities recognizing the cu­mu­la­tive effect of initially applying the standard at the date of initial ap­pli­ca­tion). 

Interaction with the FASB

The FASB has adopted a more piecemeal approach to amending its revenue standard and has decided to publish more extensive amend­ments. Final amend­ments to the ap­pli­ca­tion guidance on principal versus agent con­sid­er­a­tions were published in March 2016, amend­ments on iden­ti­fy­ing per­for­mance oblig­a­tions and licensing are expected soon, and amend­ments on other narrow scope amend­ments and practical ex­pe­di­ents on tran­si­tion are expected slightly after that.

Also, while the IASB has announced that it will no longer attend TRG meetings as it is of the view that stake­hold­ers need to know that they can continue their im­ple­men­ta­tion process with the con­fi­dence that IFRS 15 will not be subject to further changes, the FASB declared in February that it will continue to address im­ple­men­ta­tion issues and has scheduled three TRG meetings for 2016.

Additional information

To learn more about the amendments and potential impacts, look out for an upcoming publication as part of our Clearly IFRS series and register for our webcast that will be available for viewing June 14, 2016.

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Maryse Vendette

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IASB updates work plan

Apr 22, 2016

On April 22, 2016, the International Accounting Standards Board (IASB) released its updated work plan.

Changes to the work plan include:

The revised IASB work plan is available on the IASB's website.

IASB votes to reconfirm overlay and deferral approach

Apr 19, 2016

On April 19, 2016, the International Accounting Standards Board (IASB) voted in favour of the staff recommendations in connection with the redeliberation of the proposals around the application of IFRS 4 together with IFRS 9.

There was a clear majority for supporting the staff's recommendations. Of the 13 board members that were present, only one board member voted against all staff recommendations. Another board member voted for most of the staff recommendations, but against the recommendations around disclosures. There were some comments from board members that will lead to changes, however, these comments were mainly directed towards easier application. Thus, the approaches proposed in the Exposure Draft “Amendments to IFRS 4: Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts” (overlay approach and deferral approach) have been essentially reconfirmed.

IASB webcast on the definition of a lease now available

Apr 13, 2016

On April 13, 2016, the International Accounting Standards Board (IASB) released a webcast on the definition of a lease as part of its webcast series on IFRS 16 implementation.

This webcast discusses the IFRS 16 requirements and application guidance relating to the definition of a lease, practical differences between IFRS 16 and the previous definition of a lease  in IAS 17 and IFRIC 4, and how entities should account for contracts with both lease and service components.

The new webcast and all previous webcasts of the series are available on the IFRS 16 implementation page on the IASB’s website.

Summary of March GPF meeting now available

Apr 06, 2016

On April 6, 2016, the International Accounting Standards Board (IASB) posted the minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the IASB held in London on Wednesday, March 2, 2016.

The topics discussed at the meeting included:
  • IASB Update
  • Update on implementation activities — IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases.
  • Disclosure Initiative: Principles of Disclosure Discussion Paper
  • Preparers’ experience with improving effectiveness of disclosures 
  • IFRS 2 Share-based Payment
  • Improvements to the impairment requirements in IAS 36
  • Rate-regulated activities
Review the full report on the IASB's Web Site.

Summary of the CMAC February 2016 meeting

Apr 06, 2016

On April 6, 2016, the International Accounting Standards Board (IASB) released a summary of the Capital Markets Advisory Committee (CMAC) meeting which was held in London on February 25, 2016.

The topics discussed at the meeting included:

  • IFRS Advisory Council — Role and recent activities
  • Disclosure Initiative — Final amendments to IAS 7
  • Different effective dates — IFRS 9 and the new insurance contracts standard
  • Structured Electronic Reporting — What do investors need?
  • Education Session — The new impairment requirements in IFRS 9
  • Primary Financial Statements
  • IFRS 16 — Update on the new standard

The full meeting summary is available on the IASB's website.

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