In June 2010, the FASB and IASB (the "boards") jointly issued a proposed standard on revenue recognition to increase the consistency of revenue recognition across industries and capital markets. In November 2011, the boards re-exposed the proposed revenue guidance to seek constituent feedback and to avoid any unintended consequences from applying the final standard. The following publications provide a summary of the boards' redeliberations and tentative decisions made to date and the potential implications for certain industries.
- The FASB and IASB concluded substantive redeliberations of their 2011 exposure draft. The proposed standard is intended to provide a consistent revenue recognition approach that will increase financial statement comparability across companies and industries.
- The proposed standard would apply to a company's contracts with customers, except for contracts that are within the scope of other standards (e.g., leases, insurance, financial instruments). Elements that are in the scope of other standards will be separated and accounted for under those standards..
- Separate contracts would be combined if they were entered into at or near the same time with the same customer (or related parties) and either the contracts were negotiated as a package with a single commercial objective, the amount of consideration in one contract is dependent on the performance of the other contract, or they form a single performance obligation.
- Performance obligations would be accounted for separately if they relate to goods or services that are capable of being distinct from other goods or services promised in the contract, and the goods or services are distinct within the context of the contract because they are not highly dependent on, or highly interrelated with, other promised goods or services in the contract. A good or service is distinct if the customer can benefit from the good or service on its own or with resources readily available to it. Otherwise distinct performance obligations may be combined and treated as a single performance obligation if they are not distinct in the context of the contract, meaning they are highly dependent on or interrelated with other promised goods or services in the contract.
- The transaction price is allocated to all the separate performance obligations in an arrangement. It reflects the amount of consideration to which an entity expects to be entitled in exchange for transferring goods or services, and includes an estimate of variable consideration that is subject to a constraint. The variable consideration would be limited to an amount not subject to significant reversals in the future based on the entity’s experience with similar arrangements. The transaction price will also reflect the impact of the time value of money if there is a significant financing component present in an arrangement.
- Revenue would be recognized when an entity satisfies each performance obligation by transferring control of the promised goods or services to the customer. Goods or services can transfer at a point in time or over time depending on the nature of the arrangement. Specific criteria are provided for when a performance obligation is satisfied over time.
- The incremental costs of obtaining a contract are capitalized if the costs are expected to be recovered. Costs incurred to fulfill a contract are capitalized if they are not covered by other relevant guidance, relate directly to a contract, will be used to satisfy future performance obligations, and are expected to be recovered.
- A final standard is expected in the first quarter of 2014. The IASB’s standard will be effective for the first interim period within annual reporting periods beginning on or after January 1, 2017, while the FASB’s standard will be effective for public entities for the first interim period within annual reporting periods beginning after December 15, 2016 (private companies have an additional year). The FASB’s standard will prohibit early adoption for public entities, while the IASB will permit it. An entity can apply the new revenue standard retrospectively, including using certain practical expedients. An entity can alternatively choose to recognize the cumulative effect of applying the new standard to existing contracts in the opening balance of retained earnings on the effective date with proper disclosures.
Corporate Governance SeriesShareholder questions: Management's considerations for 2014 annual meetings
3/3/14 | Assurance services
This PwC publication is intended to help management and the board of directors of public companies prepare for the annual meeting of shareholders. It contains example questions on topics that may be top-of-mind for shareholders, along with background information and suggested actions for management’s consideration.
Setting the standardSetting the standard - January 2014
1/9/14 | Assurance services
Welcome to the latest edition of Setting the standard. It includes the latest updates on the standard-setting activities of the FASB and IASB. Learn more inside.
Corporate Governance SeriesThe quarter close - Directors edition: A look at this quarter's financial reporting issues - Q4 2013
12/23/13 | Center for Board Governance
This quarterly publication is designed to keep directors informed about the latest accounting and financial reporting issues that impact board decisions and company policies.
Quarter closeThe quarter close — Fourth quarter 2013: Publication and new video perspectives
12/10/13 | Assurance services
This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q4 publication and view our new video perspectives.
DatalineDataline: Revenue from contracts with customers: Boards wrap up redeliberations – A look at the recent decisions (No. 2013-23)
11/25/13 | Assurance services
The FASB and IASB reached decisions related to their revenue project, including the constraint on variable consideration, collectibility, and licenses.
In briefIn brief: Revenue recognition – Boards wrap up redeliberations (No. 2013-45)
11/1/13 | Assurance services
The boards address outstanding issues related to the revenue recognition project, including the constraint on variable consideration, collectibility and licenses.
Corporate Governance SeriesThe quarter close - Directors edition: A look at this quarter's financial reporting issues - Q3 2013
10/3/13 | Center for Board Governance
The Q3 2013 edition focuses on accounting and reporting issues for private companies that could impact public companies, statement of cash flows, entities under common control, contingencies, new vice-chairman at the FASB, PCAOB proposal on improving auditor reporting, and international developments on auditor rotation and retendering.
Setting the standardSetting the standard - September 2013
9/25/13 | Assurance services
Welcome to the latest edition of Setting the standard. It includes the latest updates on the standard-setting activities of the FASB and IASB. Learn more inside.
Quarter closeThe quarter close — Third quarter 2013: Publication and new video perspectives
9/17/13 | Assurance services
This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q3 publication and view our new video perspectives.
- PwC and Knowledge@Wharton: New revenue rules delayed, but start planning now
8/22/13 | US Capital Markets and Accounting Advisory Services
A new, comprehensive accounting standard is set to change the way many companies recognize revenue in their financial statements, and that could reverberate through myriad systems and processes in significant ways. Many companies do not yet realize the degree of change the new standard will usher in, nor how it could affect many industries in unexpected ways, according to PwC and Wharton.
In briefIn brief: Boards re-deliberate aspects of joint revenue project (No. 2013-38)
7/29/13 | Assurance services
The FASB and IASB met in July to discuss the constraint on recognizing revenue from variable consideration, customer credit risk, and accounting for arrangements that do not meet the definition of a contract with a customer.
Quarter closeThe quarter close — Second quarter 2013: Publication and new video perspectives
6/18/13 | Assurance services
This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q2 publication and view our new video perspectives.
EITF observerEITF observer: A meeting synopsis - June 2013
6/14/13 | Assurance services
The EITF met on June 11, 2013 to discuss six issues. PwC's EITF observer provides you an insightful summary of decisions reached and the changes affecting US GAAP.
In briefIn brief: Boards discuss application of revenue model to credit card reward programs and other sweep issues (No. 2013-29)
5/29/13 | Assurance services
The FASB and IASB met in May to discuss sweep issues related to their revenue recognition project, including accounting for credit card reward programs. This In brief article provides a summary of the decisions reached by the boards.
In briefIn brief: Boards meet separately on revenue – FASB on effective date and non-public entities, IASB on early application (No. 2013-15)
3/22/13 | Assurance services
The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) met separately in March to discuss specific U.S. GAAP and IFRS matters related to the proposed revenue recognition standard. The FASB focused on non-public entities and reached decisions on disclosure requirements, transition, and effective date. The FASB also amended its previous decision about effective date for public entities. The IASB decided to permit early application of the revenue standard. The decisions by both boards are tentative and subject to change. Any remaining “sweep” issues will be discussed at future meetings.
Quarter closeThe quarter close — First quarter 2013: Publication and new video perspectives
3/18/13 | Assurance services
This edition of The quarter close highlights current developments in financial reporting, including key standard-setting developments in revenue, financial instruments, and other hot topics, as well as SEC and PCAOB regulatory updates.
DatalineDataline: Revenue from contracts with customers: Boards finalize redeliberations – A comprehensive look at the new revenue model (No. 2013-04)
3/8/13 | Assurance services
The FASB and IASB substantively concluded redeliberations of their joint 2011 exposure draft, Revenue from Contracts with Customers, in February 2013. The boards reached decisions on the remaining key issues including disclosures, transition, and effective date at their most recent meetings. Details of these decisions, as well as a comprehensive look at the model at the end of the key redeliberations, are included in this Dataline. Any remaining “sweep” or new issues identified by the boards will be discussed at future board meetings, as needed.
DatalineDataline: Revenue from contracts with customers -- Boards conclude redeliberations on key revenue measurement and recognition issues (No. 2013-02)
1/23/13 | Assurance services
The FASB and IASB (the "boards") met in November and December 2012 to continue redeliberating their joint revenue recognition project. The boards reached tentative decisions on key remaining measurement and recognition issues, including the constraint for recognizing revenue from variable consideration, collectibility, licenses, allocation of transaction price, and contract acquisition costs.
WebcastSelf study course: Revenue Recognition Exposure Draft Update
US GAAP & IFRS Convergence
Revenue is a key metric subject to considerable focus by investors and other stakeholders. Participants in this 90 minute self study course will gain a heightened understanding of recent developments on the revenue recognition proposal, along with potential impacts to their business.
DatalineDataline: Highlights of the 2012 AICPA National Conference on Current SEC and PCAOB Developments (No. 2012-22)
12/13/12 | Assurance services
The 2012 AICPA National Conference on Current SEC and PCAOB Developments (the Conference) was held on December 3, 4, and 5, 2012. Conference presenters included representatives from regulatory and standard-setting bodies, auditors, users, preparers, industry experts, and an investor panel. Remarks centered mainly on the status of potential incorporation of IFRS into the U.S. financial reporting system, updates on regulatory and financial reporting matters, capital formation, and the auditing profession’s impact on the reliability and usefulness of financial statements.
Quarter closeThe quarter close — Fourth quarter 2012: Publication and new video perspectives
12/12/12 | Assurance services
This edition of The quarter close has the latest updates and timely reminders to help you navigate your year-end reporting process with a number of hot topics, including fair value, asset impairments, pensions, valuation allowances, and more.
DatalineDataline: 2012 year-end accounting and reporting considerations - Leading practices and lessons learned on key topics (No. 2012-20)
12/3/12 | Assurance services
This year end, entities continue to face many complex financial reporting issues such as providing new fair value disclosures, accounting for debt modifications, and evaluating revenue recognition guidance. Economic challenges around the world continue to have broad financial reporting implications. While not an all-inclusive list, this Dataline is intended to serve as a timely reminder of leading practices and lessons learned on key issues that companies should consider as they navigate the year-end financial reporting process.
DatalineDataline: Revenue from contracts with customers -- The redeliberations continue (No. 2012-15)
10/25/12 | Assurance services
The FASB and IASB (the “boards”) met in September and October 2012 to continue redeliberating their joint revenue recognition project. They reached tentative decisions on the constraint for recognizing variable consideration, certain issues related to collectibility, time value of money, distributor and reseller arrangements, contract modifications, and measuring progress toward satisfying a performance obligation. This Dataline summarizes the boards’ redeliberations and tentative decisions made at the September and October joint meetings and the potential implications for certain industries.
Quarter closeThe quarter close — Third quarter 2012: Publication and new video perspectives now available
9/17/12 | Assurance services
This edition of The quarter close highlights the SEC report on IFRS, the latest on conflict minerals, health care reform, and several FASB releases that are sure to keep you busy this fall. Video perspectives are also now available.
DatalineDataline: Revenue from contracts with customers -- 'Ready, set, redeliberate' (No. 2012-07)
8/9/12 | Assurance services
The FASB and IASB met in July to begin redeliberating their joint revenue recognition project. This PwC Dataline summarizes the boards’ redeliberations and tentative decisions made during the July board meeting, and the potential effects on certain industries. It also includes audio links to additional information on selected topics.
Practical tipPractical tip: Changes in percentage-of-completion contract estimates -- disclosure requirements and considerations (No. 2012-04)
7/18/12 | Assurance services
This Practical tip highlights the U.S. GAAP disclosure requirements and considerations relating to changes in contract estimates when using the percentage-of-completion method of accounting.
DatalineDataline: Responses are in on the re-exposed proposed revenue standard -- Constituents voice their support...and concerns (No. 2012-04)
5/31/12 | Assurance services
The FASB and IASB released an updated exposure draft, Revenue from Contracts with Customers, on November 14, 2011. The boards received approximately 360 comment letters in response to the updated exposure draft, down significantly from the nearly 1,000 comment letters received on the exposure draft released in June 2010. Since issuing the updated exposure draft, the boards have continued extensive outreach efforts, including four public and numerous private, industry-focused roundtables. This PwC Dataline addresses the areas of focus in roundtables and in comment letters received by the boards on the updated exposure draft.
PwC comment letter (FASB)PwC Comments on FASB and IASB Exposure Draft - Revenue from Contracts with Customers
3/14/12 | Assurance services
PwC agrees with the boards' objectives and supports a single revenue recognition model that provides clearer and more consistent guidance. PwC supports the overall project. There are, however, areas where the concepts could be more clearly articulated, might be challenging to apply, or do not appear cost-beneficial. In the letter, these areas are explained in the firm's responses to the boards' questions, including responses to the FASB's questions on the US GAAP consequential amendments.
DatalineDataline: Revenue from contracts with customers -- The proposed revenue standard is re-exposed (revised January 3, 2012) (No. 2011-35)
11/22/11 | Assurance services
The FASB and IASB (the "boards") released an updated exposure draft, Revenue from Contract with Customers, on November 14, 2011 and are requesting comments by March 13, 2012. The boards have asked whether the proposed guidance is clear, and requested feedback specifically on: performance obligations satisfied over time; presentation of the effects of credit risk; recognition of variable consideration; the scope of the onerous performance obligation test; interim disclosures; and transfer of nonfinancial assets that are outside an entity's ordinary activities (for example, sale of PP&E). It is unclear when a final standard will be issued; however, the boards have indicated that the final standard will have an effective date no...
DatalineDataline: Revenue from contracts with customers -- Key decisions propel the project forward (No. 2011-19)
4/21/11 | Assurance services
The FASB and IASB began redeliberations on their proposed revenue standard in January 2011 and have continued those redeliberations through April. The boards have focused their discussions on common themes in the comment letters, and have reached several tentative decisions. Some decisions confirm conclusions in the exposure draft and others significantly change direction from what was proposed previously. This Dataline summarizes key aspects of the proposed standard, certain themes identified in the comment letters, and tentative decisions made during recent board meetings.