Important change for US revenue recognition

  • Heads Up Image

02 Oct 2009

Deloitte (United States) has published an issue of the Heads Up newsletter discussing the EITF's recently finalised Issue 08-1, Revenue Arrangements With Multiple Deliverables, which will significantly change the accounting for revenue recognition for arrangements with multiple deliverables.

Entities will be able to separately account for individual deliverables for many more revenue arrangements. By removing the criterion that entities must use objective and reliable evidence of fair value in separately accounting for deliverables, the EITF expects the recognition of revenue to more closely align with the economics of certain revenue arrangements. Click to Download this Issue of Heads Up (PDF 158k).

Issue 08-1 will replace all references to 'fair value' in ASC 605-25 (FASB Codification section relating to multiple deliverables) with references to 'selling price' to clarify that the selling-price measure in Issue 08-1 is not a market-participant measure as required by ASC 820 (previously known as Statement 157). The selling price of an item is an entity-specific measure that represents the amount an entity would sell that item for in a stand-alone transaction with a customer.

Issue 08-1 must be applied prospectively to revenue arrangements entered into or materially modified in fiscal years beginning on or after 15 June 2010, but the vendor may elect to adopt it retrospectively. IFRSs do not include the type of guidance on multiple deliverables as is in Issue 08-1, but IASB and FASB currently are working on a joint project on Revenue Recognition. A Discussion Paper was issued in December 2008.


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.