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Joint webcast on revenue recognition

May 29, 2014

On June 5, 2014, the FASB and IASB will hold a joint webcast on the boards’ final standard on revenue from contracts with customers.

Speakers include FASB Member Larry Smith and IASB Member Patricia McConnell, who will discuss the new revenue model and answer questions about it. The presentation starts at 10:00 a.m. (EDT) and is scheduled to last one hour. Registration information is available on the FASB's Web site.

IASB and FASB issue new, converged revenue standards

May 28, 2014

Today, the FASB published its new revenue guidance, ASU 2014-09, "Revenue From Contracts With Customers" (Topic 606). At the same time, the IASB published its equivalent standard, IFRS 15, "Revenue from Contracts with Customers." The standards are the result of a convergence project between the two boards and (1) specify how and when an entity will recognize revenue arising from contracts with customers and (2) require such entities to provide users of financial statements with more informative, relevant disclosures.



The joint revenue project commenced in 2002 and the key objectives of the project were to:

  • Remove inconsistencies and weaknesses in existing revenue requirements.
  • Provide a more robust framework for addressing revenue issues.
  • Improve comparability of revenue recognition practices across entities, jurisdictions, and capital markets.
  • Provide more useful information to users of financial statements through improved disclosure requirements.
  • Simplify the preparation of financial statements by reducing the number of requirements to which preparers must refer.

The first discussion paper was published in December 2008, and the first exposure draft was issued in June 2010. After the comment period, the boards decided to reexpose the updated proposals. A second exposure draft was published in November 2011. The boards received many comments from respondents and engaged in extensive outreach on their proposals, all of which was taken into account in their redeliberations and led to some important changes in the final standards.



The ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of the ASU’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (e.g., sales of property, plant, and equipment; real estate; or intangible assets). Such provisions include guidance on recognition (including determining the existence of a contract and control principles) and measurement (existing accounting guidance applicable to these transfers (e.g., ASC 360-20) has been amended or superseded).

IFRS 15, Revenue from Contracts with Customers, applies to all contracts with customers except for: (1) leases within the scope of IAS 17, Leases; (2) financial instruments and other contractual rights or obligations within the scope of IFRS 9, Financial Instruments, IFRS 10Consolidated Financial Statements, IFRS 11, Joint Arrangements, IAS 27, Separate Financial Statements, and IAS 28, Investments in Associates and Joint Ventures; (3) insurance contracts within the scope of IFRS 4, Insurance Contracts; and (4) nonmonetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers.



  • The new standard provides a single principles-based, five-step model to be applied to all contracts with customers. The five steps are:
    • Identify the contract(s) with a customer.
    • Identify the performance obligations in the contract.
    • Determine the transaction price.
    • Allocate the transaction price to the performance obligations in the contract.
    • Recognize revenue when (or as) the entity satisfies a performance obligation.
  • There is new guidance on whether revenue should be recognized at a point in time or over time, which replaces the previous distinction between goods and services.
  • Where revenue is variable, a new recognition threshold has been introduced by the standard. This threshold requires that variable amounts are only included in revenue if, and to the extent that, it is highly probable that a significant revenue reversal will not occur in the future as a result of reestimation. However, a different approach is applied for sales- and usage-based royalties from licenses of intellectual property; for such royalties, revenue is recognized only when the underlying sale or usage occurs.
  • The standard provides detailed guidance on various issues such as identifying distinct performance obligations, accounting for contract modifications, and accounting for the time value of money.
  • Detailed implementation guidance is included on topics such as sales with a right of return, customer options for additional goods or services, principal versus agent considerations, licensing, and bill-and-hold arrangements.
  • The standard also introduces new guidance on costs of fulfilling and obtaining a contract and specifying the circumstances in which such costs should be capitalized. Costs that do not meet the criteria must be expensed when incurred.
  • The standard introduces new, increased requirements for disclosure of revenue in a reporter’s financial statements.


Effective date

The ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016, for public entities. Early application is not permitted; however, early adoption is optional for entities reporting under IFRSs.

The 2017 effective date has been chosen, in part, to allow time for entities to make changes to systems and processes that may be needed in order to comply with the new Standard.


Additional information

FASB's Web site

  • Press release
  • ASU 2014-09:
    • Section A — Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers
    • Section B — Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables
    • Section C — Background Information and Basis for Conclusions
  • FASB in Focus introducing the new standard
  • Three-part video series discussing the objectives, changes, and disclosure requirements in the new standard
  • Joint webcast on June 5, 2014, at 10:00 a.m. (EDT)

IASB's Web site


FASB and IASB talk leases

May 23, 2014

At their joint videoconference meeting on May 22, 2014, the FASB and IASB continued redeliberating their May 2013 exposure draft on leases. The boards discussed (1) the definition of a lease, (2) separating lease and nonlease components, and (3) initial direct costs.

Definition of a lease

The boards tentatively decided to provide:

  • Additional guidance on when a lessor’s substitution rights are considered substantive in the evaluation of whether an identified asset exists.
  • Additional guidance on evaluating whether a customer has the right to control the use of the underlying asset.
  • A more robust framework and examples related to determining which decisions on directing the use of the asset would have the greatest impact on the economic benefits derived from use of the asset.

Separating lease and nonlease components

The boards tentatively reconfirmed that (1) multiple lease components in a contract should be combined or separated from one another and (2) both lessees and lessors would be required to separate lease components and nonlease components (e.g., any services provided) in an arrangement and allocate the total transaction price to the individual components.

Further, the boards concluded that both lessees and lessors would be required to “reallocate the consideration in a contract when the contract is modified and the modification is not a separate, new contract.”

Initial direct costs

The boards tentatively decided that the definition of initial direct costs for both lessees and lessors should include only those costs that are incremental to the arrangement and that the entity would not have incurred if the lease had been obtained. In addition, the boards tentatively agreed that a lessee would include all initial direct costs in its initial measurement of the right-of-use asset.

Next steps

The boards will discuss the following topics at a future meeting:

  • Subleases.
  • Sale-and-leaseback transactions.
  • Leases of “small” assets.
  • Presentation and disclosure.
  • Cost-benefit concerns, transition, and effective date.
  • Leveraged leases and private-company and not-for-profit issues (FASB only).
  • Other topics (e.g., related-party leases).

For more information, see the related Deloitte Accounting Journal entry and the meeting notes on the FASB's Web site.

GASB conducts survey on Statement 34

May 23, 2014

The GASB has announced that it is conducting a survey on the effectiveness of Statement No. 34, “Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments.” Specifically, the GASB is seeking feedback on the following questions:


  • “What concerns exist regarding the application of the standards?
  • How do the costs of applying the standards compare with the perceptions of the benefits of the resulting information?
  • What financial reporting model requirements are effective or ineffective in providing information that is essential for decision-making and that enhances the ability to assess a government’s accountability?”

Preparers of governmental financial statements that choose to participate in the survey must complete it by June 6, 2014.

For more information, see the press release on the GASB’s Web site.

Joint revenue standard to be issued next Wednesday

May 22, 2014

The FASB and IASB are expected to issue their joint standard "Revenue From Contracts With Customers" (ASU 2014-09 and IFRS 15, respectively) on May 28, 2014.

The objectives of the boards’ revenue recognition project are to clarify and converge the revenue recognition principles under U.S. GAAP and IFRSs and to develop guidance that would streamline and enhance revenue recognition requirements while also providing “a more robust framework for addressing revenue issues.” The boards believe that the standard will improve the consistency of requirements, comparability of revenue recognition practices, and usefulness of disclosures.

For more information, see the press release on the IASB’s Web site.

SEC to say more on IFRSs in the "relatively near future"

May 21, 2014

SEC Chair Mary Jo White discussed the possible implementation of IFRSs in the United States during a speech at the annual FAF Trustees dinner in Washington, D.C. Ms. White discussed when the SEC will provide more information on the incorporation of IFRSs into U.S. domestic capital markets, noting that she hopes to "be able to say more in the relatively near future."

In her speech, Ms. White provided a brief history of IFRSs in the Unites States, including permitting foreign private issuers to report using IFRSs without a reconciliation to U.S. GAAP, and the 2012 SEC staff report about the possible incorporation of IFRSs into the U.S. financial reporting system.

In referencing speeches by previous SEC Chair Mary Schapiro and SEC Commissioner Elisse Walter, Ms. White expressed sentiments about the importance of converged accounting standards in global capital markets, but also noted the following:

They also said three other important things: first, the interests of U.S. investors would remain front and center as the Commission considers IFRS; second, the FASB would remain front and center as the ultimate standard setter of accounting standards for U.S. companies; and third, the role the United States plays in the development of global standards must be an important consideration.

While strongly agreeing with these sentiments, Ms. White acknowledged increasing pressure from the SEC's international regulatory and accounting counterparts and others for more information about the SEC's intentions on the incorporation of IFRSs into U.S. domestic capital markets, saying:

The Commission last spoke on these questions in February 2010 when it said that: “…a single set of high-quality globally accepted accounting standards will benefit U.S. investors and that this goal is consistent with our mission…” That remains true today and I have made it a priority for the Commission to position itself to make a further statement on this very important subject, now that we have six years of experience working on the priority convergence projects with the IASB and over six years of experience with foreign private issuers filing IFRS-prepared financial statements without a U.S. GAAP reconciliation.

Ms. White also focused on the importance of accounting standards in financial reporting and the work of the FASB. In discussing the convergence process with the IASB, Ms. White noted the imminent release of new standards on revenue recognition, and that the joint project "on one of our most fundamental and critical standards is a true success for both [the] FASB and the IASB."

In a wide-ranging speech, Ms. White also discussed the importance of the enforcement of accounting standards, the SEC's rule making priorities, and the SEC's disclosure effectiveness project which is "intended to make sure that investors are being well-served by the disclosures they receive" and that the SEC "will work with the FASB to identify ways to improve the effectiveness of disclosures in corporate financial statements and to minimize duplication with other existing disclosure requirements."

The full transcript of the speech is available on the SEC's Web site.

GASB issues proposal on fair value measurement

May 19, 2014

The GASB has issued an exposure draft that “is intended to improve financial reporting by clarifying the definition of fair value for financial reporting purposes, establishing general principles for measuring fair value, enhancing the fair value application guidance, and enhancing disclosures about fair value measurements.”

According to GASB Chairman David A. Vaudt, the proposed changes would “increase clarity, consistency, and comparability in governments’ fair value measurements and their related disclosures.”

Comments on the proposal are due by August 15, 2014.

For more information, see the press release and exposure draft on the GASB’s Web site.

SEC posts drafts of EDGAR filer manuals to its Web site

May 19, 2014

Last week, the SEC posted to its Web site drafts of the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) Filer Manual — Volumes I, II, and III for upcoming EDGAR Release 14.1.

The new release, which is scheduled for implementation on June 16, 2014, will introduce several changes, including the following:

  • Support for the U.S. GAAP 2014 Taxonomy.
  • Discontinued support for the U.S. GAAP 2012 Taxonomy and U.S. 2011 Document and Entity Information Taxonomy.
  • Improvements to filings containing the EX-101 XBRL documents.
  • Renaming “corporate debt" to "debt securities" for certain submission form types.
  • Change in the dissemination method for unofficial PDF attachments to EDGARLink Online submissions.
  • Updated FAQ section.

This draft has not been approved by the Commission and is subject to change. The final version of the EDGAR Filer Manual will be posted on the SEC’s Web site once it has been approved.

More information is available on the SEC's Web site:

Federal appeals court rejects business group’s motion to stay entire conflict minerals rule

May 16, 2014

On Wednesday, the U.S. Court of Appeals for the District of Columbia Circuit rejected an emergency motion filed by the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable to stay the SEC’s conflict minerals rule in its entirety until the U.S. District Court for the District of Columbia addresses the appeals court’s earlier remand order.

The group argued that the conflict minerals rule no longer achieves its purpose, that it is likely to be vacated, and that a stay would avoid “forcing companies to implement an interim procedure for filing truncated reports under unilateral staff guidance that is subject to change at any time.”

For more information, including a brief history of the conflict minerals issue, see the related Deloitte Accounting Journal entry.

Chief Accountant to leave SEC

May 16, 2014

The SEC has announced that Paul A. Beswick, the agency's chief accountant, will leave the SEC to return to the private sector.

Mr. Beswick was appointed acting chief accountant in the SEC's Office of the Chief Accountant in July 2012 after James L. Kroeker left. He was named to the position permanently in December 2012.

Mr. Beswick served as staff director on the multi-year effort to help the Commission evaluate the implications of incorporating IFRSs into the financial reporting system for U.S. companies and the beginning of his term saw the publication of the SEC final staff report, Work Plan for the Consideration of Incorporating IFRSs into the Financial Reporting System for U.S. Issuers, on July 13, 2012. However, since then the SEC has not announced any further steps in this regard.

The SEC has not yet named Mr. Beswick's successor.

For more information, see the press release on the SEC's Web site.

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