Revenue from contracts with customers (joint IASB-FASB meeting)

Date recorded:

Summary of feedback on proposed amendments to principal versus agent considerations — Agenda Paper 7F and 7G (Joint Session with FASB

The agenda paper provided an analysis of question 2 of the ED related to the amendments proposed in respect to principal vs agent considerations.  The agenda paper provided background information and a summary of the feedback received. The staff recommended that the IASB proceed with the amendments because the majority of respondents agreed with the IASB proposal and highlighted the fact that principal versus agent considerations were a matter of judgement and the proposed amendments provide a good framework for entities to exercise judgement and apply the requirements.

In addition, the staff proposed to eliminate the credit risk indicator because of the feedback obtained which indicated, for example, that credit risk was not considered a strong indicator of control.

The proposed amendments derived from issues discussed by the TRG regarding the guidance in IFRS 15 and the IASB proposed add clarifying amendments in the application guidance, in the illustrative examples and to add additional examples.


The Boards (FASB and IASB) approved the staff recommendations and no significant issues were raised during the joint session which was significantly brief. 

The comments raised from the IASB Board members were focused on the following:

  1. the guidance added in paragraph B35A which related to the assessment of control when an entity provided significant service of integrating goods or services.  In that regard, there was concern as to whether the concept of integrating good or services was a control indicator; the staff responded that the integration existed before the entity transferred the good or service to the customer and accordingly was not a control indicator; and
  2. the use of specific concepts considered new terms such as a right to a service. There was some concern about having new terms which were not defined.  The staff responded that the terms “specified good or service” and “right to a service” were not new because they were used in the application examples and they had been used consistently in the guidance. 

The FASB Board members indicated that they were very pleased with the feedback received which was encouraging. They pointed out that the area (principal vs agent assessment) would still involve significant judgement and they did not expect to eliminate that with the proposed guidance. Some questions raised to the staff related to the following:

  1. The comment letters indicated that there was demand to receive more guidance to understand the issues; particularly, with the ability to distinguish specified good or services and right to a service. The staff responded that with the objective of maintaining convergence, they would incorporate the factors discussed in the memo (FASB Memo)  in the illustrative examples and/or in the Basis for Conclusions; and
  2. Also, the comment letters indicated that the examples did not include references to the control indicators, one Board member asked whether this would be acceptable and whether the examples would be updated. The staff responded that they tried to emphasise that the most important factor was to apply the principle and that not all the control indicators would be relevant in every decision; and that the indicators were helpful to support the analysis rather than being the key factor in the decision; one Board Member suggested adding in the examples the indicators and explaining which ones were not relevant for the decision.

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