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Revenue Recognition

Date recorded:

The Boards discussed what revenue disclosures should be proposed in the forthcoming exposure draft (ED).

Disclosure objective

The Boards discussed whether the ED should contain a disclosure objective similar to that in IFRS 7. While not agreeing explicitly to provide such an objective, the Boards did not support the approach suggested by the staff and requested that any disclosure objective should tie disclosure to the drivers of revenue-generation in the business: what affected the timing, nature, and amount of revenue; significant estimation uncertainty; etc.

Nature of and accounting policies applicable to contracts with customers

The Boards discussed but did not approve a staff suggestion related to the disclosure of the nature of and accounting policies applicable to contracts with customers. Board members thought the staff suggestions were too vague to be operational.

Linking performance with financial position

The Boards agreed that an entity should disclose a roll-forward of opening and closing balances of the net contract position. In doing so, Board members were extremely concerned that the Boards would be forcing on preparers meaningless disclosures that would not be useful to users and urged that greater clarity be provided. The staff should find a way to ensure that the disclosure was required only when the movement in the net contract position was a meaningful measure - such as in the aeroplane manufacture or shipbuilding industries, in which the order book was as important as the annual performance.

Onerous contracts

The Board referred a proposal that an entity should disclose a roll-forward of the opening and closing balances of the additional liability for onerous contracts back to the staff. Board members noted that any such disclosure had to integrate a larger data set: what was included in onerous contracts; what was added to the category and what was removed; information about similar contracts in the same class as those classified as onerous; etc.

Level of disaggregation

The Boards discussed but did not conclude on the level of disaggregation of revenue recognised during a financial period and how it should be achieved. The staff proposed an approach that would require disaggregation for each category of significant goods and services identified in its accounting policies. Board members thought that the economic characteristics of the goods and services should be a determining factor, not the accounting policies. Other Board members were concerned that the staff needed to be more rigorous in its analysis before adding more disclosures.

Extent of judgement exercised

The Boards discussed but did not conclude on a disclosure principle for significant judgements with the objective in ASC Topic 605-25-50 (Multiple Element Arrangements: Disclosures).

The Chairman asked the staff to work with a team of three IASB and two FASB advisors to develop revised proposals for revenue disclosures in general.

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