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IFRS industry insights — The revenue recognition project — An update for the manufacturing industry

Published on: May 30, 2011

In June 2010, the IASB and FASB took a major step toward developing an entirely new revenue recognition standard by issuing a set of proposals in the form of an exposure draft (ED).

These proposals would significantly affect the recognition of revenue in the manufacturing industry. Since issuing the ED, the boards have conducted extensive outreach. The comment period on the ED ended on October 22, 2010, and garnered over 950 responses. The boards subsequently hosted roundtable sessions that included participants from all constituencies, including preparers, users, and auditors from a wide cross section of industries.

Respondents from the manufacturing industry expressed concern over a number of proposals in the ED, including the identification of performance obligations, the satisfaction of performance obligations, the onerous contract test, contract costs, fulfillment costs, and warranties. The boards recently discussed these topics and made some tentative decisions that differ from the proposals in the ED, and are following this up with further outreach activities.

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