FASB tackles principal vs. agent guidance

The proposal would amend the revenue recognition standard to clarify rules.

FASB proposed changes to the new revenue recognition standard that are meant to clarify how to determine whether an entity is a principal or an agent in a contract.

Under the standard, an entity is required to determine whether it has promised:

  • To provide a good or service to a customer, which makes the entity a principal.
  • To arrange for the good or service to be provided to the customer by another party, which makes the entity an agent.

The determination is based on whether the entity controls the good or service before it is transferred to the customer, and the new standard includes indicators to assist in this evaluation.

Constituents have voiced concerns about the guidance through the joint transition resource group that is helping FASB and the International Accounting Standards Board (IASB) evaluate implementation concerns regarding the new, converged standard.

The proposed amendments are a response to those concerns. The proposal would not change the core principle of the guidance but is designed to clarify implementation guidance.

The proposal is aligned with clarifications proposed July 30 by the IASB in an exposure draft, Clarifications to IFRS 15. Comments on the FASB proposal were due Oct. 15.

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.