Implementing the Rev Rec Standard:
Submit Your Issues to the Joint Transition Resource Group
To aid preparers in moving to the new standard, the FASB and the International Accounting Standards Board (IASB) have created the Joint Transition Resource Group (TRG) for Revenue Recognition.To aid preparers in moving to the new standard, the FASB and the International Accounting Standards Board (IASB) have created the Joint Transition Resource Group (TRG) for Revenue Recognition. The TRG’s mission is to inform the Boards of potential implementation issues that could arise when companies and other organizations implement the new standard. The TRG also will provide stakeholders with an opportunity to learn about the new standard from others who are involved with implementation.
Initially, the TRG will focus on four issues: gross versus net revenue, gross versus net revenue – amounts billed to customers, sales-based and usage-based royalties, and impairment testing of capitalized contract costs.Initially, the TRG will focus on four issues: gross versus net revenue, gross versus net revenue – amounts billed to customers, sales-based and usage-based royalties, and impairment testing of capitalized contract costs.
Stakeholders are encouraged to submit any additional implementation issues that they have identified to the TRG according to guidelines set forth on the FASB website. Specifically, the TRG will consider issues that:
- Relate to the new Revenue Recognition standard
- Have the potential to be applied in different ways, and possibly lead to diversity in practice, and
- Are relevant to a wide group of stakeholders.
The TRG will not issue guidance. However, it will publicly discuss interpretations of the principles and publish minutes.The TRG will not issue guidance. However, it will publicly discuss interpretations of the principles and publish minutes. TRG meetings will be co-chaired by the vice chairmen of the FASB and the IASB, and will be video-webcast live on the FASB’s and the IASB’s websites. Stakeholders may also preregister to attend in person.
Upcoming TRG Meetings
The first TRG meeting will take place on July 18, 2014. During that meeting, TRG members will be asked to provide input on four potential implementation issues identified by stakeholders:
Gross versus net revenue
There may be multiple interpretations of how to determine and account for whether the reporting organization is a principal or an agent to contracts for certain intangible goods or services. As part of this discussion, TRG members will be asked to consider the amount of revenue that should be recognized if a principal receives a net amount of cash and does not know the gross amount, and how transaction price allocation guidance should be applied when the reporting organization is a principal for some of the deliverables and an agent for others.
Gross versus net revenue: Amounts billed to customers
There may be multiple interpretations of how to determine whether to present certain items billed to customers as revenue or as a reduction of costs. Examples include shipping and handling fees, reimbursements of other out-of-pocket expenses, and taxes or other assessments collected from customers and remitted to governmental authorities.
The first TRG meeting will take place on July 18, 2014.Sales-based and usage-based royalties in contracts with licenses and goods or services other than licenses
There may be differing interpretations about sales-based and usage-based royalties promised in exchange for licenses of intellectual property to a contract that includes a promise to deliver (a) one or more licenses of intellectual property and (b) one or more goods or services that are not licenses of intellectual property.
Impairment testing of capitalized contract costs
TRG members will be asked to provide input about implementation issues related to specific guidance on impairment testing of the asset recognized from the incremental costs of obtaining a contract or costs incurred in fulfilling a contract with a customer.
The next TRG meeting is scheduled for October 31, 2014. More details about that meeting will be available on the FASB website.