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Additional Guidance with respect to Section 3400, Revenue [Completed]

Effective date:

The amendments are effective for annual financial statements relating to fiscal years beginning on or after January 1, 2021. Earlier application is permitted.

Last updated:

December 2019

Overview

At its meeting on July 17, 2018, the Accounting Standards Board (AcSB) approved a project to address stakeholders’ issues about insufficient guidance on accounting for revenue in Section 3400, Revenue, in Part II of the Handbook.

The Board pro­posed ad­di­tional guid­ance on the fol­low­ing top­ics: (i) bill-and-hold arrange­ments; (ii) mul­ti­ple-el­e­ment arrange­ments; (iii) the per­cent­age of com­ple­tion method; (iv) re­port­ing rev­enue gross or net; and (v) up­front non-re­fund­able fees/pay­ments.

In parallel with developing the proposed guidance, the Board continued to examine the need for further improvements, including an assessment of retaining the current risk-and-rewards model. The Board consulted its Private Enterprise Advisory Committee and Not-for-Profit Advisory Committee in developing the proposals.

On May 1, 2019, the AcSB re­leased an Ex­po­sure Draft that pro­poses to amend Sec­tion 3400, Rev­enue. The amend­ments pro­vide ad­di­tional guid­ance on how to ap­ply cer­tain re­quire­ments in Sec­tion 3400. Com­ments were re­quested by July 31, 2019.

At its meeting on September 17-18, 2019, the AcSB discussed feedback received on its Exposure Draft and approved the issuance of final amendments to Section 3400, subject to final drafting and a written ballot. Following this, the AcSB issued the final CPA Canada Handbook amendments in December 2019. Section 3400 has been amended to provide guidance on:

  • how to determine whether an arrangement consists of a group of contracts or a single contract and identifying the units of account in an arrangement;
  • allocating consideration in multiple-element arrangements to separate units of account on a relative stand-alone selling price basis and methods for estimating the stand-alone selling price when it is not directly observable;
  • accounting for revenue under the percentage of completion method;
  • indicators to consider in determining whether revenue should be reported gross or net;
  • criteria to use in determining when to recognize revenue for a bill and hold arrangement;
  • determining when to recognize revenue for upfront non-refundable fees or payments; and
  • disclosure requirements for contracts in progress at the end of the reporting period accounted for using the percentage of completion method.

 

Other developments

December 2019

On December 11, 2019, the AcSB released its Basis for Conclusions, which sets out how the AcSB reached its conclusions on the Revenue project, and discussions on significant matters arising from comments received and issues raised in response to its Exposure Draft.

May 2019

On May 1, 2019, the AcSB released an Exposure Draft that proposes to amend Section 3400, Revenue. The amendments will provide additional guidance on how to apply certain requirements in Section 3400. Comments are requested by July 31, 2019.

March 2019

In March 2019, the AcSB staff up­dated the sta­tus of this pro­ject to in­di­cate that the AcSB ex­pects to is­sue an Ex­po­sure Draft in Q2/2019 and the related Handbook material in Q4/2019.

January 2019

In January 2019, the AcSB staff updated the status of this project to indicate that the AcSB expects to issue an Exposure Draft in Q4/2019.

August 2018

In August 2018, the staff of the AcSB updated this project to indicate that the Board expects to issue an Exposure Draft in Q2/2018.

July 2018

At its meeting on July 17, 2018, the Accounting Standards Board approved a project to address stakeholders’ issues about insufficient guidance on accounting for revenue in Section 3400, Revenue.

 

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