Revenue recognition tweaks proposed

FASB seeks to improve guidance on collectibility, noncash consideration, and completed contracts.

FASB proposed changes that are designed to improve guidance on collectibility, noncash consideration, and completed contracts at transition in the new revenue recognition standard.

Proposed Accounting Standards Update, Revenue From Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, also would provide:

  • A practical expedient for contract modifications at transition.
  • An accounting policy election related to the presentation of sales taxes and other, similar taxes collected from customers.

The proposed changes would affect only narrow portions of the revenue recognition guidance that arose through questions to the transition resource group created by FASB and the International Accounting Standards Board (IASB) in an effort to aid implementation of the new, converged standard.

The amendments FASB proposed would:

  • Clarify the objective of the collectibility criterion in Step 1 of the standard and add a new criterion to clarify when revenue would be recognized for a contract that fails to meet the criteria in Step 1.
  • Specify that the measurement date for noncash consideration is contract inception, and clarify that the variable consideration guidance in the standard applies only to variability resulting from reasons other than the form of the consideration.
  • Clarify that in a completed contract for purposes of transition, all or substantially all of the revenue was recognized under legacy GAAP before the date of initial application.

The proposed amendments are not identical to changes proposed by the IASB, but FASB expects that the ­proposal would not result in financial outcomes that are ­significantly different from those reported under IFRS for similar transactions.

Comments were due Nov. 16.

Previously, FASB proposed changes related to licensing and identifying performance obligations in the revenue recognition standard and delayed the effective date of the standard. The IASB also has proposed changes to the standard and delayed the effective date.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

News quiz: Taking an economic snapshot and looking to the future

Recent news included IRS actions that affect individuals and partnerships and a possibly influential move by a Big Four accounting firm.Take this short quiz to see how much you know about the news.