Project Update

Revenue Recognition—Joint Project of the FASB and IASB

Last updated on June 4, 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 May 24, 2013) 

The FASB continued redeliberating the revised Exposure Draft, Revenue from Contracts with Customers (the 2011 ED).

May 23, 2013: Consequential amendments relating to transfers of assets that are not an output of the entity’s ordinary activities

The Board discussed the consequential amendments of its tentative decision in January 2013 relating to transfers of assets that are not an output of the entity’s ordinary activities. The Board tentatively decided that the guidance in the revenue standard that relates to recognition, measurement (including the constraint), and existence of a contract would apply to sales or transfers to noncustomers of nonfinancial assets, including in substance nonfinancial assets (held directly or in a subsidiary) that do not constitute a business.

May 24, 2013 Application of the Model: Credit Card Reward Programs

Some preparers in the financial services industry requested clarification about the application of the revenue model to credit card reward programs in their feedback to the 2011 ED. Specifically, those respondents questioned whether the accounting illustrated in Example 24 in the 2011 ED would always apply to the award credits in a credit card reward program.

The Boards tentatively decided to amend paragraph IE21/IG79 (that is, the introductory paragraph to Example 24 in the 2011 ED) to clarify that the existence of a “customer loyalty program” and the promise to transfer award credits does not automatically give rise to a performance obligation. The Boards noted that in all arrangements, including, for example, where there are more than two parties to the arrangement, the entities in the arrangement should consider all the facts and circumstances in applying the revenue model to determine whether the promise to transfer award credits gives rise to a performance obligation.


PROJECTS