The core principle proposed in the ED would require an entity to recognise revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to receive in exchange for those goods or services.

Below is an excerpt from the comment letter:

We disagree with certain aspects of the ED's proposals and we have significant concerns over other aspects. Nevertheless, we continue to support the boards in their overall objective of creating a common revenue Standard, and we believe that the work done by the boards to date can, if further developed and modified, form the basis for a clear and robust Standard on revenue recognition.

Our main concern with the ED is that the material in relation to 'control' is neither well developed nor clearly explained. As drafted, the guidance could be interpreted in a number of ways, which could lead to significant diversity in practice. We note that it is particularly unclear how the proposed guidance should be applied to the provision of many services.

We believe the ED's proposals on how the transaction price should be allocated between performance obligations, and on how to account for contract modifications that are judged interdependent, should be modified. As currently drafted, they will sometimes result in accounting that fails to depict properly the economic substance of the underlying arrangements.

Click for:

• Complete letter of comment to IASB (PDF 94k)
• Our revenue recognition project page
• Summary of ED/2010/6