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 boards have been making steady progress since July to redeliberate the proposed guidance and have finalized their redeliberations on key revenue measurement and recognition issues. Some of the more significant decisions to date include:
- clarifying when performance obligations are distinct;
- confirming that offers to provide goods or services that the customer can provide to its customer are performance obligations;
- clarifying the criteria for when performance obligations are satisfied over time;
- retaining the proposals relating to the use of a residual approach to estimate the standalone selling price of a performance obligation;
- removing the requirement to assess onerous performance obligations;
- retaining the requirement to account for time value of money in contracts with a significant financing component;
- clarifying the objective of the constraint on recognizing revenue from variable consideration removing the exception for licenses of intellectual property where payments vary based on the customer’s subsequent sales (for example, sales-based royalties);
- retaining the requirement to capitalize contract acquisition costs if they are incremental and recoverable;
- affirming collectibility is not a threshold for revenue recognition and agreeing that initial and subsequent impairments of customer receivables should be presented as a separate expense item in the statement of comprehensive income;
- agreeing that a license is either a promise to provide a right which transfers at a point in time or a promise to provide access to intellectual property which transfers benefits to the customer over time; and
- deciding on disclosures, transition, and effective date for public companies and non-public companies.
The boards have substantially completed their redeliberations and a final standard is planned for the summer of 2013.
Regardless of industry, it is likely that every company will be affected to some extent. The potential impact of the boards' proposed standard reaches far beyond financial reporting. Companies should assess the impact on entity-wide functions such as information technology systems, key metrics, and legal contracts (e.g., debt covenants and contracts with customers).
Setting the standardSetting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- March 2013
3/25/13 | Assurance services
Our Q1-2013 edition provides updates on the latest developments in revenue recognition, classification and measurement of financial instruments, impairment of financial assets, leases, insurance contracts, and more.
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.
In briefIn brief: Boards conclude key revenue redeliberations with decisions on disclosures and transition (No. 2013-11)
2/21/13 | Assurance services
The FASB and IASB (the “boards”) reached decisions at their February 20 meeting on disclosure requirements, transition, and effective date for the revenue recognition standard. These decisions substantively conclude the boards' redeliberations on this project. The boards’ decisions are tentative and subject to change. Any remaining “sweep” issues will be discussed at future meetings.
In briefIn brief: Boards decide on scope of revenue recognition standard and other matters (No. 2013-03)
1/31/13 | Assurance services
The FASB and IASB (the “boards”) decided at their January meeting to clarify the scope of the revenue standard, and they confirmed the accounting for repurchase agreements and performance fees by asset managers. They also confirmed that the accounting for transfers of non-financial assets that are not an output of an entity's ordinary activities should follow the guidance in the revenue recognition standard. This In brief article provides an overview of the boards' decisions and what's next.
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.
Setting the standardSetting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- December 2012
12/19/12 | Assurance services
There is no shortage of activity to report this quarter as the boards forged ahead on their major convergence projects. The FASB and IASB made several key decisions as they move closer toward issuing exposure drafts and final standards. In the Q4-2012 edition of Setting the standard, we update you on the latest developments of the joint standard setting projects of the FASB and IASB, as well as the latest on FASB-only projects.
In briefIn brief: Boards conclude redeliberations on key revenue measurement and recognition issues (No. 2012-58)
12/18/12 | Assurance services
The FASB and IASB reached decisions at their December meeting on allocating the transaction price to separate performance obligations, applying the proposed model to bundled arrangements, constraining the cumulative amount of revenue recognized on licenses, and accounting for contract acquisition costs. The boards’ decisions are tentative and subject to change. This In brief article provides an overview of the boards' decisions and what's next.
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.
In briefIn brief: Boards make decisions on several major outstanding revenue issues (No. 2012-54)
11/20/12 | Assurance services
An overview of the FASB and IASB's November 2012 decisions on revenue recognition from variable consideration; presentation of amounts not expected to be collected; and licenses, from PwC's CFOdirect Network.
WebcastRevenue recognition exposure draft update webcast – November 29, 2012
The FASB and IASB (the "boards") issued a revised exposure draft for their joint revenue recognition proposal in November 2011. The boards have been re-deliberating the project since July 2012 and have made several tentative decisions on the comments received from constituents on this exposure draft. We invite you to join us as we discuss key topics re-deliberated and related business impacts on our next PwC webcast.
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.
- Power and Utilities Alert 2012-08: Revenue from contracts with customers
8/1/12 | Power & utilities
The Financial Accounting Standards Board (FASB) and International Accounting Standards Board discussed the 2011 joint exposure draft, Revenue from Contracts with Customers. The exposure draft respondents requested guidance on disaggregating contract deliverables into separate performance obligations.
In briefIn brief: FASB clarifies accounting for Continuing Care Retirement Communities refundable entrance fees (No. 2012-29)
7/27/12 | Assurance services
On July 24, 2012, the FASB issued guidance addressing the accounting for refundable entrance fees received by continuing care retirement communities. In summary, the FASB clarified that a continuing care retirement community should classify the refundable entrance fee as deferred revenue only when its resident contract provides for repayment of the fee upon reoccupancy, the repayment is limited to the proceeds received from the new occupant, and the entity's policy and practice is to enforce the refund limitation. Otherwise, the entrance fee is classified as a liability. This In brief article provides further information on the new guidance.
In briefIn brief: FASB and IASB redeliberate to make the proposed revenue standard less "onerous" (No. 2012-28)
7/20/12 | Assurance services
The FASB and IASB (the boards) met on July 19 to discuss their joint project on revenue recognition. They reached decisions on identifying separate performance obligations, performance obligations satisfied over time, and onerous performance obligations.
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...
EITF observerEITF observer: A meeting synopsis - June 2011
6/24/11 | Assurance services
At the June 23, 2011 EITF meeting, the Task Force discussed three Issues, reaching final consensuses on two Issues (Issue 09-H and Issue 10-H) and consensuses-for-exposure on one Issue (Issue 10-E). If the final consensuses are ratified by the FASB at its July 13, 2011 meeting, the related Accounting Standards Updates (ASUs) will amend the FASB Accounting Standards Codification (ASC) and become final authoritative accounting guidance.
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.
DatalineDataline: Revenue from contracts with customers -- The constituents have been heard... (No. 2011-16)
3/1/11 | Assurance services
The FASB and IASB received over 960 comment letters in response to their June 24, 2010 exposure draft, Revenue from Contracts with Customers. A number of recurring themes were noted in the comment letters, even across industries. Areas of focus included transfer of control, identification of performance obligations, determining the transaction price, transition, segmentation, accounting for warranties, licenses of intellectual property, and disclosures. At their January and February 2011 meetings, the boards began redeliberating their proposals, focusing on the common themes in the comment letters, and reached a number of tentative decisions. This Dataline summarizes key aspects of the proposed standard, certain themes identified in the...
DatalineDataline: New revenue recognition guidance -- A more economic approach to accounting for arrangements with multiple deliverables (revised May 12, 2011*) (No. 2011-02)
1/11/11 | Assurance services
In October 2009, the FASB issued new guidance for arrangements with multiple deliverables under which a company is required to use its best estimate of selling price for the deliverables in an arrangement when vendor specific objective evidence or third party evidence of the selling price is not available. In Dataline 2009-54, we provided our analysis and insights on the new guidance. In this new Dataline, we've updated and expanded on the discussion in Dataline 2009-54 to incorporate additional insight and implementation considerations based on our experience with companies that have early adopted the new guidance.
DatalineDataline: Revenue from contracts with customers -- The responses are in... (No. 2010-45)
12/20/10 | Assurance services
The FASB and IASB received over 960 comment letters in response to their June 24, 2010 exposure draft, Revenue from Contracts with Customers. The comment period closed on October 22, 2010. A number of recurring themes were noted in the comment letters, even across industries. Areas of focus included transfer of control, identification of performance obligations, determining the transaction price, transition, segmentation, accounting for warranties, licenses of intellectual property, and disclosure requirements. The boards expect to issue the final standard in 2011, with a likely effective date no earlier than 2014. This Dataline summarizes key aspects of the proposed standard as well as the themes in comment letters received by the boards.
DatalineDataline: Highlights of the 2010 AICPA National Conference on Current SEC and PCAOB Developments (No. 2010-44)
12/16/10 | Assurance services
Last week's annual AICPA National Conference on Current SEC and PCAOB Developments focused on restoring public trust and investor confidence in the U.S. capital markets. Presenters called for all members of the financial reporting supply chain, including boards, management and auditors, to play a role in these efforts. This Dataline takes a closer look at the topics discussed at the conference.
DatalineDataline: 2010 year-end accounting and reporting considerations (No. 2010-43)
12/13/10 | Assurance services
This year end, companies continue to face many complex financial reporting issues such as asset impairments, debt modifications, revenue recognition and pensions. Recently issued legislation has created additional reporting considerations. Also, the SEC has put additional emphasis on compliance with certain existing disclosure requirements such as disclosures of loss contingencies, goodwill impairment, segments, and liquidity. Recently issued guidance by the FASB has become effective in 2010, including new guidance on consolidations, updates to fair value disclosures, and disclosures about the credit quality of finance receivables. While not intended to serve as an all-inclusive checklist, this Dataline should be helpful as a timely...
PwC comment letter (FASB)PwC Comments on Exposure Draft: Revenue from Contracts with Customers
10/25/10 | Global accounting consulting services
PwC agrees with the theoretical merit of many of the concepts included in the proposed standard. PwC believes, however, that there are a number of situations where the concepts may be difficult to apply, do not appear cost beneficial, or both. PwC also agrees with the boards that full retrospective application of the proposed standard might benefit users, but a more pragmatic approach to transition might likely be needed in many situations. The firm encourages the boards to allow for early adoption of the proposed standard.