Tentative Board Decisions

Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.

February 10, 2016 Board Meeting

Revenue recognition—narrow-scope improvements and practical expedients. The Board redeliberated its September 2015 proposed Accounting Standards Update, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The Board affirmed most of the amendments in the proposed Update.


The Board affirmed its proposals to:
  1. Clarify the objective of the collectibility criterion in paragraph 606-10-25-1. The objective of this assessment is to determine whether the contract is valid and represents a genuine transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services that will be transferred to the customer.
  2. Add a new criterion to paragraph 606-10-25-7 to clarify when revenue would be recognized for a contract that fails to meet the criteria in paragraph 606-10-25-1. That criterion will allow an entity to recognize revenue in the amount of consideration received when the entity has transferred control of the goods or services, the entity has stopped transferring additional goods or services and has no obligation to transfer additional goods or services, and the consideration received from the customer is nonrefundable.
In addition, the Board decided to retain the collectibility threshold in paragraph 606-10-25-1(e). The threshold is probable, which is defined in Topic 606 as “likely to occur.”

Presentation of Sales Taxes

The Board affirmed its proposal to provide a policy election that permits an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price.

Noncash Consideration

The Board affirmed its proposals to:
  1. Specify that the measurement date for noncash consideration is contract inception.
  2. Clarify that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration.
In addition, the Board decided not to specify the definition of fair value related to noncash consideration.

Contract Modifications and Completed Contracts at Transition

The Board affirmed its proposals to:
  1. Provide a practical expedient that permits an entity to determine and allocate the transaction price on the basis of all satisfied and unsatisfied performance obligations in a modified contract as of the beginning of the earliest period presented in accordance with the guidance in Topic 606. Thus, an entity would not be required to separately evaluate the effects of each contract modification. An entity that chooses to apply the practical expedient would apply the expedient consistently to similar types of contracts.
  2. Clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy generally accepted accounting principles before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP would be irrelevant to the assessment of whether a contract is completed.
  3. Permit an entity to apply the modified retrospective transition approach either to all contracts at the date of initial application or only to contracts that are not completed contracts at the date of initial application.
Disclosure of Remaining Performance Obligations

The Board did not reach a decision on whether to add a practical expedient to the disclosure requirement for remaining performance obligations in paragraphs 606-10-50-13 through 50-14. The Board instructed the staff to perform additional research about the effect of introducing an additional disclosure practical expedient for variable consideration that is not included in the transaction price for measurement and recognition of revenue.

Next Steps

The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.

The Board will discuss the practical expedient to the disclosure requirement for remaining performance obligations at a future Board meeting.