The Board discussed accounting for revenue recognition where obligations are performed by a third party.

The staff believed that there were two possible answers namely:

1. That revenue is recognised when the obligation is assumed by the third party; and
2. That revenue is not recognised as one obligation is replaced by another of equal value.

The staff supported the second view.

The Board discussion in general supported the second view and noted that it was based on an activity-based approach to revenue. Considerable concern was however raised that the ultimate conclusion of this approach was to move towards a "value-added" approach with which a significant number of the Board members would disagree. The discussion focused on identifying identifiable differences in transactions that would differentiate the activity-based approach from the value-added approach. The staff was requested to consider this in discussions with FASB staff members and make proposals to the Board.