Additional Guidance with respect to Section 3400, Revenue [Completed]
Effective date: |
The amendments to Section 3400 are effective for fiscal years beginning on or after January 1, 2022 (was for fiscal years beginning on or after January 1, 2021) with earlier application permitted |
Last updated: |
May 2022 |
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.
At its meeting on April 15, 2020, as a result of the impact of the Covid 19 pandemic, the AcSB decided to defer the effective date of these amendments to Section 3400 by one year to fiscal years beginning on or after January 1, 2022. Earlier application continues to be permitted. The relevant material deferring the effective date of these amendments to Section 3400 was issued to the CPA Canada Handbook – Accounting Part II on August 1, 2020.
Other developments
August 2020
On August 1, 2020, the material deferring the effective date of these amendments to Section 3400 by one year to fiscal years beginning on or after January 1, 2022 was issued to the CPA Canada Handbook – Accounting Part II.
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.
On December 1, 2019, these amendments to Section 3400 were issued to the CPA Canada Handbook – Part II, effective for fiscal years beginning on or after January 1, 2021, with earlier application permitted.
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.