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Journal entry — Revenue project — FASB and IASB discuss feedback

Published on: Sep 19, 2013

At their joint meetings on September 17 and 18, the FASB and IASB discussed feedback related to three aspects of the external review draft of their proposed standard on revenue recognition: (1) collectibility, (2) constraining revenue, and (3) license revenue.

The boards indicated that their objective was not to make decisions on alternatives proposed by their staffs about these topics but rather to develop a path forward and thus refine the focus of their redeliberations at the next joint meeting in October. Discussion therefore concentrated on the following:

  • Collectibility — Whether a defined collectibility threshold should be a prerequisite for the existence of a contract and whether such threshold aligns with the guidance on constraining variable consideration.
  • Constraining revenue — Whether the standard should specify the level of confidence an entity must have before including variable consideration in the estimate of the transaction price; how the amount of variable consideration to include in the transaction price should be measured (including whether a “minimum amount” should be determined and how to recognize it); how revenue from usage-based royalties should be measured and recognized; and whether estimates of variable consideration should be reassessed each period.
  • License revenue — Whether the standard should address revenue recognition on the basis of type of license (i.e., sale of a right versus the sale of access to an entity’s intellectual property) and whether it should include criteria or indicators for distinguishing between the types of licenses.

Board members gave the staffs direction on additional ways to address these matters and will consider alternatives developed by the staffs at the October meeting.

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