FASB clarifies revenue guidance on practical expedients
May 10, 2016
On May 10, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-12 "Narrow-Scope Improvements and Practical Expedients", which amends certain aspects of the Board’s new revenue standard, ASU 2014-09 "Revenue From Contracts With Customers."
The amendments, which were issued in response to feedback received by the FASB–IASB joint revenue recognition transition resource group (TRG), include the following:
- Collectibility
- Presentation of sales tax collected from customers
- Noncash consideration
- Contract modifications at transition
- Transition technical correction
The ASU notes that in light of the following, there may be “minor differences in financial reporting outcomes between U.S. GAAP and IFRS” as a result of the ASU’s amendments:
- IFRS 15, Revenue From Contracts With Customers, does not allow a policy election for the presentation of sales taxes on a net basis.
- IFRS 15 does not prescribe the measurement date for noncash consideration.
- The different dates associated with an entity’s application of (1) the practical expedient for contract modifications and (2) the term “completed contracts” for transition purposes.
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.
