Project Updates

Revenue Recognition—Joint Project of the FASB and IASB

Last Updated: February 26, 2010 (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.

Project Objective
Due Process Documents
*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 

PROJECT OBJECTIVE

The objective is to clarify the principles for recognizing revenue and to create a joint revenue recognition standard for US GAAP and IFRSs that companies can apply consistently across various industries and transactions.

By developing a common standard that clarifies the principles for recognizing revenue, the boards aim to:

  • Remove inconsistencies and weaknesses in existing revenue recognition standards and practices
     
  • Provide a more robust framework for addressing revenue recognition issues
     
  • Simplify the preparation of financial statements by reducing the number of standards to which companies must refer
     
  • Improve comparability of revenue across companies and geographical boundaries.

DUE PROCESS DOCUMENTS

On December 19, 2008, the Boards published, for public comment, a Discussion Paper, Preliminary Views on Revenue Recognition in Contracts with Customers.

  • Download the FASB Discussion Paper. Download the IASB Discussion Paper which is the same except for minor differences in spelling, style, and format.
     
  • Read the press release introducing the Discussion Paper.
     
  • Read a snapshot of the Boards’ preliminary views in the Discussion Paper.
     
  • Listen to the FASB’s webcast on the Discussion Paper presented on March 27, 2009.

The Discussion Paper was open for public comment until June 19, 2009.

In July 2009, the Boards considered a summary of comment letters received. The comment letters will be considered further as the Boards further develop the proposed revenue recognition model.

The Boards expect to publish the Exposure Draft in 2010.

*DECISIONS REACHED AT THE LAST MEETING (February 16, 2010) 

The Boards discussed scope and transition.

Scope

The Boards tentatively decided that the proposed standard would apply to an entity's contracts with customers, except for:
  1. Lease contracts within the scope of IAS 17, Leases, or FASB Accounting Standards Codification™ Topic 840, Leases
  2. Insurance contracts within the scope of IFRS 4, Insurance Contracts, or Topic 944, Financial Services—Insurance
  3. Contracts within the scope of IFRS 9, Financial Instruments; IAS 39, Financial Instruments: Recognition and Measurement; or Topic 825, Financial Instruments
  4. Guarantees (other than product warranties) within the scope of IFRS 4, IAS 39, or Topic 460, Guarantees.
At a future meeting, the Boards will consider further how an entity accounts for a contract that includes some performance obligations within the scope of the proposed standard and other performance obligations that fall outside it, but that are within the scope of other standards.

Transition

The Boards tentatively decided that an entity should apply the proposed standard retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, and Topic 250, Accounting Changes and Error Corrections.

The FASB tentatively decided to prohibit early adoption of the proposed standard. The IASB tentatively decided to permit early adoption by first-time adopters of IFRSs. The IASB will decide at a future meeting whether to permit or prohibit early adoption by entities already applying IFRSs.

Next steps

At their March 2010 joint meeting, the Boards plan to continue their discussions on disclosure, scope, and contract costs.
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