The Board noted the four views of revenue previously discussed, these being:

• The Gross Inflows View
• The Liability Extinguishment View
• The Broad Performance View
• The Value Added View

In addition the staff noted that the Board had approved a preliminary set of working criteria for revenue recognition, termed the elements criterion and the measurement criterion, that focus on uncertainties about whether the elements definitions have been met (element uncertainty) and uncertainties about the ability to reliably measure the item in question (measurement uncertainty). Revenues should be recognised when both of those criteria are met.

The elements criterion

The elements criterion requires that a change in assets or liabilities has occurred, specifically:

1. An increase in assets has occurred that increases equity, without a commensurate investment by owners; and

2. A decrease in liabilities has occurred that increases equity, without a commensurate investment by owners (such as the forgiveness by owners of a debt owed to them by the entity).

The measurement criterion

The measurement criterion requires that the change in assets or liabilities can be appropriately measured, specifically:

1. The assets or liabilities are measured by means of a relevant attribute; and

2. The increase in assets or decrease in liabilities is measurable with sufficient reliability.

Contractual rights

It was further noted that the Board had considered the economic consequences that contractual rights have for their holders and that related contractual obligations have for their obligors, and tentatively decided that:

• Conditional rights and obligations do not meet the definitions of assets and liabilities.
• Unconditional rights and mature rights meet the definition of an asset if they are enforceable and give access to future economic benefits.
• Unconditional obligations and mature obligations meet the definition of a liability if they are enforceable and oblige the entity to make a future sacrifice of economic benefits.
• Unless a contract is enforceable, the obligations that it imposes on the contracting parties will not meet the definition of liabilities, and the corresponding rights that it conveys to counterparties will not meet the definition of assets.
• Contractual rights and obligations that qualify for recognition as assets and liabilities should initially be measured at their fair values.

The staff further noted for enforceable contracts the Board discussed whether the unit of account (the subject of recognition) should be the individual assets and liabilities arising from the rights and obligations embodied in the contract or the contract as a whole and had agreed that:

The unit of account should be based on the legal remedies for a breach of contract that are available to the contracting parties.

• For contracts for which the only legal remedy for a breach of contract is money damages, the only outcome that could occur from settling the contract before performance of the items specified in the contract (that is, while the contract remains executory) is a flow of cash in one direction between the contracting parties. As a result:
• One party has a pre-performance asset and the other a pre-performance liability (pre-performance assets and liabilities are the unconditional rights and obligations that exist until either party to a contract performs its stated conditional obligation); and
• The unit of account should be the contract as a whole and a net amount should be recognised.

• That legal remedy renders unconditional the rights to performance of the items specified in the contract and the related performance obligations for the contracting parties.
• The only outcome that could occur from settling the contract at any time (unless one of the parties forgoes its right to specific performance) is flows of assets in both directions between the contracting parties. As a result:
• Each contracting party would have at least one asset and one liability; and
• The unit of account for each party should be the individual assets and liabilities arising from its contractual rights and obligations, reported on a gross basis.

The staff noted that the Board tentatively agreed to use fair value as the measurement attribute for analysing issues, but not to decide the measurement attribute for an exposure draft until decisions are made in the Measurement project. The staff further noted that the Board has discussed whether the fair value of performance obligations should reflect the price that the reporting entity would have to pay a third party to assume responsibility for performing all of those obligations (generally "wholesale" fair value) rather than the amounts at which the reporting entity sold (or could sell) identical or similar products or services to similarly situated customers (generally "retail" fair value).

It was clarified that no decision had been taken on whether a remeasurement of a performance obligation should occur but the working principle to use fair value would imply that if remeasurement were to take place it would be at fair value. In addition certain Board members requested clarity in determining the markets to be used in both the "wholesale" and "retail" methods.