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Revenue Recognition

Date recorded:

The Board discussed further its previous decision at a joint meeting in April with the FASB, that revenue should be recognised when the reporting entity obtains an unconditional right to at least some consideration. Various examples were discussed related to the following:

  • Agenda Paper 14B explores how revenue would be recognised if, in the event of breach, a contract requires a legal remedy of specific performance.
  • Agenda Paper 14C explores how revenue would be recognized if, in the event of customer breach, a contract requires a legal remedy of monetary damages and those damages would require the customer to pay an amount that reimburses the reporting entity for its costs incurred to date plus a profit margin. In return, the customer would obtain the work in process and title to it. In other words, the contract requires a legal remedy of 'partial physical settlement.'
  • Agenda Paper 14D began to consider how revenue would be recognized if, in the event of customer breach, a contract requires a legal remedy of monetary damages and those damages would require the customer to pay a net cash settlement amount to the seller.
  • Agenda Paper 14E began to consider how revenue would be recognized if a contract has contractually stated customer acceptance provisions that unconditionally obligate the customer to compensate the reporting entity for performance to date.

The Board did not make specific decisions related to the above examples but indicated its support and general agreement with the direction taken by the Staff.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.