Project Update

Revenue Recognition—Joint Project of the FASB and IASB

Last updated on April 3, 2013. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards. 

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the FASB and IASB (the Boards). It was prepared by the staff and is for the information and convenience of the Boards’ constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

Due Process Documents
Project Objective and Summary of the Proposed Model
Outreach/Field Work
*Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date  
*Next Steps  
*Board/Other Public Meeting Dates    
Related FASB Documents   
Background Information   
Contact Information   

DUE PROCESS DOCUMENTS

On November 14, 2011, the Boards published, for public comment, an Exposure Draft, Revenue from Contracts with Customers. The Exposure Draft was open for public comment until March 13, 2012. On January 4, 2012, the Board published, for public comment, an Exposure Draft, Revenue from Contracts with Customers—Proposed Amendments to the FASB Accounting Standards Codification®. The Exposure Draft was open for public comment until March 13, 2012.
On June 24, 2010, the Boards published for public comment an Exposure Draft, Revenue from Contracts with Customers. The Exposure Draft was open for public comment until October 22, 2010.
On December 19, 2008, the Boards published for public comment a Discussion Paper, Preliminary Views on Revenue Recognition in Contracts with Customers.
For the most recent proposals, please see the Summary of Decisions Reached to Date.

PROJECT OBJECTIVE AND SUMMARY OF THE PROPOSED MODEL

Revenue is a crucial number to users of financial statements in assessing an entity’s financial performance and position. However, revenue recognition requirements in U.S. generally accepted accounting principles (GAAP) differ from those in International Financial Reporting Standards (IFRSs), and both sets of requirements need improvement. U.S. GAAP comprises broad revenue recognition concepts and numerous requirements for particular industries or transactions that can result in different accounting for economically similar transactions. Although IFRSs have fewer requirements on revenue recognition, the two main revenue recognition standards, IAS 18, Revenue, and IAS 11, Construction Contracts, can be difficult to understand and apply. In addition, IAS 18 provides limited guidance on important topics such as revenue recognition for multiple-element arrangements.

Accordingly, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRSs that would:
  1. Remove inconsistencies and weaknesses in existing revenue requirements.
  2. Provide a more robust framework for addressing revenue issues.
  3. Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets.
  4. Provide more useful information to users of financial statements through improved disclosure requirements.
  5. Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer.
To meet those objectives, the FASB and the IASB are proposing amendments to the FASB Accounting Standards Codification® and to IFRSs, respectively.

For additional information and a summary of the proposed model, please see the FASB In Focus or the Exposure Draft.

OUTREACH/FIELD WORK

The FASB and the IASB are reaching out to a broad audience of users, preparers, and auditors of financial statements to hear their views about the revised revenue recognition proposals intended to improve and converge the financial reporting requirements for revenue (and some related costs) from contracts with customers.

Read a summary of outreach undertaken by the staff and Boards.
Read a summary of user feedback undertaken by the staff and Boards.
Click here for an overview of the outreach completed to date as of the close of the comment period.

Public Roundtables

As part of the outreach effort on the November 2011 revised Exposure Draft, the Boards hosted a series of public roundtables in April and May of 2012. The roundtable that was held on May 8, 2012, in Salt Lake City, Utah, was specifically devoted to how the proposals in the revised Exposure Draft will affect U.S. nonpublic entity stakeholders.
 
Tokyo—April 4, 2012

Listen to the audio recording

London—April 20, 2012

Listen to the audio recording

Norwalk—April 26, 2012

Listen to the audio recording

Salt Lake City—May 8, 2012

Listen to the audio recording

Other Outreach Activities

To date, the boards have already hosted a number of workshops, webcasts and conferences on the revised Exposure Draft and have held a number of meetings with auditors, preparers, regulators and users. During these outreach activities, the staff sought to:
  1. Understand if the proposals are clear and can be applied in a way that effectively communicates the economic substance of transactions.
  2. Identify any unintended consequences.
  3. Ensure the staff is aware of significant changes to current practice.
  4. Educate constituents about the proposals and basis for the Boards conclusions.
If you would like to participate in future outreach efforts, please contact the staff.
  • Listen to a brief podcast recording of FASB Board Member Russ Golden discussing the objectives, basic elements, and expected impact of the proposals contained in the Exposure Draft.
  • Listen to the joint webcast of the FASB and IASB discussing the Exposure Draft. 
  • Download the FASB staff’s summary comparison document, Revenue recognition—Potential changes to U.S. GAAP.
  • Listen to a webcast the FASB, IASB, and the CFA Institute presented about the revised proposals on revenue recognition and how the proposals may affect investors.
  • Listen to the joint webcast of the FASB and IASB addressing frequently asked questions on the Exposure Draft.

*DECISIONS REACHED AT THE LAST MEETING (As of March 20, 2013) 

Nonpublic Entities

Annual Disclosures

Disaggregation of Revenue

The Board tentatively decided to:
  1. Retain the guidance in the 2011 ED that a nonpublic entity should disclose qualitative information about how economic factors (such as type of customer, geographical location of customers, and type of contract) and significant changes in those economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows; 
  2. Clarify that a nonpublic entity may elect not to disclose the quantitative disclosure requirements of disaggregating revenue in accordance with paragraphs 114 and 115 of the 2011 ED, as amended at the February 2013 joint Board meeting; and
  3. Clarify that if a nonpublic entity elects not to disclose the quantitative disclosure requirements in paragraphs 114 and 115 of the 2011 ED, then a nonpublic entity should, at a minimum, disclose quantitative information about the disaggregation of revenue in accordance with the timing of transfer of goods or services (for example, revenue from goods or services transferred to customers at a point in time and revenue from goods and services transferred over time).
Disclosure of Contract Balances and Costs

The Board tentatively decided to retain the guidance in paragraph 130(a) and (d) of the 2011 ED that a nonpublic entity may elect not to provide the disclosures about contract balances and assets recognized from the costs to obtain or fulfill a contract with a customer (paragraphs 117 and 128 of the 2011 ED, as amended at the February 2013 joint Board meeting).

The Board tentatively decided to require nonpublic entities to provide the opening and closing balances of contract assets, contract liabilities, and receivables from contracts with customers (if not separately presented).

Disclosure of Remaining Performance Obligations

The Board tentatively affirmed its decision in paragraph 130(b) of the 2011 ED that a nonpublic entity may elect not to disclose the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue (paragraphs 119–121 of the 2011 ED, as amended at the February 2013 joint Board meeting).

Disclosure about Judgments, Assumptions, Methods, and Inputs

The Board tentatively decided that a nonpublic entity should comply with the requirement in paragraph 124 of the 2011 ED that an entity should disclose the judgments, and changes in judgments, made in applying the requirements that significantly affect the determination of the amount and timing of revenue from contracts with customers. An entity should explain the judgments, and changes in the judgments, used in determining the following:
  1. The timing of satisfaction of performance obligations. For performance obligations that an entity satisfies over time, an entity should disclose the methods used to recognize revenue (for example, a description of the output method or input method).
  2. The transaction price and the amounts allocated to performance obligations.
  3. The methods and assumptions an entity uses when determining the amount of the transaction price that will not be subject to a revenue reversal (that is, the constrained amount).
A nonpublic entity may elect not to disclose the following:
  1. For performance obligations that an entity satisfies over time, an explanation of why such methods used to recognize revenue are a faithful depiction of the transfer of goods or services (paragraph 125(b) of the 2011 ED).
  2. For performance obligations satisfied at a point in time, the significant judgments made in evaluating when the customer obtains control of promised goods or services (paragraph 126 of the 2011 ED).
  3. The information about the methods, inputs, and assumptions used to:
    1. Determine the transaction price
    2. Estimate standalone selling prices of promised goods or services
    3. Measure obligations for returns, refunds, and other similar obligations
    4. Measure the amount of the liability recognized for onerous performance obligations (paragraph 127 of the 2011 ED).
Interim Disclosures

The Board tentatively affirmed its decision in the 2011 ED not to amend Topic 270, Interim Reporting, to specify interim disclosures on revenue from contracts with customers for nonpublic entities.

Transition

The Board tentatively affirmed its decision in the 2011 ED not to prescribe an alternative transition method for nonpublic entities.

Effective Date

The Board tentatively decided to require a nonpublic entity to apply the revenue standard for an annual reporting period beginning after December 15, 2017, and interim and annual reporting periods thereafter.

Early Application

The Board tentatively decided that a nonpublic entity may elect to apply the requirements of the revenue standard no earlier than an annual reporting period beginning after December 15, 2016, including interim reporting periods therein, as required for public companies. Additionally, a nonpublic entity may elect to apply the requirements of the revenue standard for:
  1. An annual reporting period beginning after December 15, 2016, and interim and annual reporting periods thereafter, or
  2. An annual reporting period beginning after December 15, 2017, including interim reporting periods therein.
Public Entities

Effective Date

The Board tentatively decided to require a public entity to apply the revenue standard for annual reporting periods beginning after December 15, 2016, including interim reporting periods therein. In February 2013, the Board reaffirmed its tentative decision in the 2011 ED to prohibit early application for public entities.



PROJECTS