FASB Guidance Details How to Recognize R&D Milestone Payments


Guidance issued Wednesday by FASB attempts to help companies determine when it’s appropriate to use the milestone method of revenue recognition for research or development transactions.

 

Revenue from R&D deals often hinges in whole or in part on reaching certain milestones, such as completion of phases in a drug study. Businesses often recognize these payments “as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method,” FASB says in the guidance. But confusion arose because no authoritative guidance on the proper use of the method existed..

 

Accounting Standards Update No. 2010-17 , Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition (a consensus of the FASB Emerging Issues Task Force), includes criteria for such transactions and details about disclosure requirements. It is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted.

 

SPONSORED REPORT

2018 financial reporting survey: Challenges and trends

Learn the top reporting challenges that emerged in a survey of more than 800 finance, accounting, and compliance professionals across the world, and compare them with your organization's obstacles.

PODCAST

How the skill set for today’s CFO is changing

Scott Simmons, a search expert for large-company CFOs, gives advice for the next generation of finance leaders and more, including which universities are regularly producing future CEOs and CFOs.