Initial comment letter analysis

The staff provided the Board with a preliminary analysis of 986 respondents' comment letters as well as feedback received from outreach activities conducted on the Exposure Draft Revenue Recognition.

The staff explained that most respondents were supportive of the core principles and acknowledged the progress made by the IASB and FASB since the discussion paper. However, respondents identified the followings for further clarification of the operation of those principles:

• concept of control and indicators of control to the service contracts and continuous transfer of work-in-progress
• the principle of distinct goods or service for identifying separate performance obligations.

Further, many respondents were concerned that the proposals as written could be difficult to apply consistently across a wide range of industries and may produce accounting outcomes that do not faithfully portray the economic substance of the entity's contracts with customers.

Because of those concerns, many respondents are concerned that applying the proposed requirements would impose costs on prepares in excess of the benefits of having a single revenue recognition model applying equally to all contracts with customers.

The two main issues identified for re-deliberation based on the comment received were:

• separating/segmenting a contract
• the application of the control approach.

Other issues also identified for re-deliberation include:

• transaction price and variable consideration
• credit risk
• time value of money
• onerous contracts
• transaction costs
• disclosure
• application guidance
• transition.

The Boards considered a preliminary timeline to re-deliberate the above issues and agreed to focus on the two main issues at the January meeting, with the other issues to be considered at future meetings.