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Journal Entry — Revenue — FASB Redeliberates Application of Exposure Draft to Nonpublic Entities

Published on: Mar 21, 2013

At its meeting yesterday, the FASB redeliberated how the disclosure, transition, and effective-date requirements proposed in the FASB’s and IASB’s November 2011 exposure draft (ED) Revenue From Contracts With Customers would apply to nonpublic entities.1 The Board also reconsidered its previous tentative decision about the effective date of the final revenue standard for public entities.

Nonpublic Entity Disclosures

The Board made the following tentative decisions about disclosure requirements for nonpublic entities:

  • Disaggregation of revenue — The Board affirmed that nonpublic entities should disclose qualitative information about how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows. Accordingly, nonpublic entities may elect not to disclose such information quantitatively. However, they must disclose significant changes in economic factors in the period. The Board also clarified that nonpublic entities must quantitatively disaggregate revenue according to the timing of the transfer of goods or services (e.g., according to the transfer of such items at a point in time or over time).
  • Contract balances and cost disclosures — The Board decided that nonpublic entities must disclose the opening and closing aggregate balance of contract assets and liabilities as well as receivables if such balances are not presented separately in the balance sheet. In addition, the Board affirmed that nonpublic entities may elect not to disclose information about assets recognized from the costs incurred to obtain or fulfill a contract with a customer.
  • Remaining performance obligations — The Board affirmed that nonpublic entities may elect not to disclose the amount of the transaction price allocated to remaining performance obligations or when such amount will be recognized as revenue.
  • Judgments, assumptions, methods, and inputs — The Board affirmed that nonpublic entities must disclose the judgments, and changes in judgments, made in applying the proposed revenue model that significantly affect how they determine the amount and timing of revenue recognition.

The Board also tentatively affirmed the ED’s proposal not to amend ASC 2702 to specify interim disclosure requirements for nonpublic entities. Further, the Board clarified that nonpublic entities are not subject to the additional interim disclosure requirements the Board established for public entities.

Nonpublic Entity Transition and Effective Date

The Board tentatively affirmed the ED’s proposal not to prescribe an alternative method of transition for nonpublic entities. The final standard will be effective for reporting periods beginning after December 15, 2017, and interim and annual periods thereafter. Nonpublic entities may early adopt the final guidance; however, their adoption date cannot be earlier than that for public entities.

Effective Date for Public Entities

The FASB reconsidered the tentative decision about the effective date for public entities reached at the February joint meeting and tentatively decided that for public entities, the final standard would be effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods therein.

 


[1] The FASB Accounting Standards Codification Master Glossary contains several definitions of the term “nonpublic entity.” The meaning of this term will be clarified as part of the FASB’s project on nonpublic entities.

[2] FASB Accounting Standards Codification Topic 270, Interim Reporting.

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