Revenue Recognition as Applied to Lessors and Insurance Firms
December 4-5, 2009
This website contains two categories of materials. The first category contains links to information relating to conference facilities and a preliminary conference schedule. The second category contains materials on the conference topics: Revenue Recognition as Applied to Lessors and Insurance Firms.
You are required to read the assigned Primary Readings and to diligently analyze and prepare responses to ALL of the cases prior to the conference. We look forward to your active participation in the conference discussions.
1. GENERAL AND LOGISTICAL INFORMATION
- Directions for travel to the Dolce Norwalk Center for Leadership and Innovation in Norwalk, Connecticut.
Please note that for some of the past conferences, transportation to the airport after the conference was arranged for you by the conference organizers. Given a change in billing arrangements, we are no longer able to do this. As s result, conference participants are responsible for arranging their own return transportation to the airport. The company that we have used in the past is U.S. Limousine located in Norwalk CT at (800) 637-3373. If you would like to use them, please contact them. - Information about the conference center
- Preliminary conference schedule
2. CONFERENCE INTRODUCTION AND OVERVIEW
The FASB and IASB are engaged in projects aimed at improving and converging certain financial reporting standards, with the ultimate goal being the provision of comparable financial reporting information under US GAAP and International Financial Reporting Standards. This year’s conference focuses on three current projects for which the tentative positions of the Boards differ both amongst the projects and, sometimes, between the Boards: general revenue recognition, revenue recognition for lessors, and revenue recognition for insurance contracts.
One of the primary purposes of this conference is to question the inconsistencies in the proposed accounting in these three areas and to provide input to the Boards on whether lease contracts and insurance contracts require separate revenue recognition models, and/or whether the proposed revenue recognition model can (or should) be improved to accommodate revenue recognition for either leasing or insurance. The conference readings and cases reflect the immediate importance of these issues; in particular, the cases and background readings reflect the tentative decisions of the Boards through November 1, 2009. Because this conference deals with issues that the Boards are deliberating right now, input from conference participants has the potential to immediately affect standard setting.The first background reading for the conference provides summaries of the models that the FASB and the IASB are developing for revenues (generally), and for lessors and insurance contracts. The appendix to the first background reading provides a description of the cross cutting issues (identified in these three projects) that are potential sources of differences amongst the models. The second background reading describes the basic features and characteristics of leasing and insurance contracts, and provides comparative entries that demonstrate potential differences amongst the models. The journal entries are provided for illustrative purposes only. Alternative journal entries with the same (correct) net outcomes also are possible. In preparing for the conference, participants should primarily focus on providing thoughtful, complete, and conceptually defensible answers to the cases.
On the first day of the conference, the cases will focus on the “boundaries of contracts,” with particular emphasis on whether seemingly similar economic arrangements should produce different accounting results, depending on the specific rights, obligations and terms included in the contracts. In the morning of the second day, participants will be asked to analyze a set of lease-related cases from the perspective of the lessor. Lessor accounting was added, in late 2008, to the FASB/IASB joint project on lease accounting. The lease-related cases will focus primarily on applying the “performance obligation” revenue recognition approach—tentatively approved by the Boards—to lease contracts with different features. In the afternoon of the second day, participants will consider measurement- and recognition-related related issues for insurance companies. The cases incorporate features of traditional insurance arrangements including uncertain margins, front-loaded commissions, investment participation, and long-tailed payout exposure.
The conference will close with plenary discussion about conclusions reached during the conference, some of which could affect future Board deliberations.
OBJECTIVE OF THIS CONFERENCE
The objective of the conference is to provide the FASB and IASB with early feedback on their joint projects related to revenue recognition for basic business contracts and arrangements, insurance contracts, and lease contracts. Academic participants are particularly urged to offer insights based on research with which they are familiar.
BACKGROUND READINGS
To prepare for the conference, participants will need to become familiar with the tentative decisions related to the revenue recognition project, proposed accounting by lessors (in the leases project), and the fundamentals of accounting by insurance companies. Accordingly, participants are asked to read the following prior to the conference.
- Background Reading 1: Summary of Models for General Revenue Recognition, Lessor Accounting and Accounting by Insurance Companies, and a Summary of Cross-Cutting Issues
- Background Reading 2: Sample Contracts for General Revenue Recognition, Lessors and Insurance Companies, with Model Illustrations
CONFERENCE CASES
The primary focus of the conference will be on the analysis and discussion of a series of cases. Conference participants are expected to prepare complete responses to all of the cases before arriving at the conference and to actively participate in the conference discussions relating to the cases. The cases are available in the PDF file accessible by clicking on the following link – Conference Cases: Boundaries of Contracts, Lessor Accounting, Accounting by Insurance Companies and Related Issues.
Please contact Joe Vernuccio at jrvernuccio@fasb.org or at 203.956.5209 if you have difficulties downloading or accessing these materials.