FinREC issues revenue recognition working drafts for informal comment

By Kim Kushmerick, CPA, CGMA

The AICPA Financial Reporting Executive Committee (FinREC) issued for informal comment Monday nine working drafts that discuss accounting issues related to the implementation of the new revenue recognition standard that was issued in May 2014 by FASB and the International Accounting Standards Board.

These are the first of many working drafts that FinREC will issue for informal comment discussing considerations and illustrative examples of industry-specific transactions for entities implementing Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers (Topic 606).

When finalized, the considerations and illustrative examples will be included in a new revenue recognition guide the AICPA is developing. The guide will be designed to provide nonauthoritative guidance to preparers regarding the new standard.

The working drafts issued for informal comment Monday relate to issues that may be encountered by asset management entities and aerospace and defense entities.

The AICPA is seeking comment on these issues by Dec. 31. Comments on the revenue recognition implementation issues related to asset management can be emailed to Irina Portnoy at Comments on the implementation issues related to aerospace and defense can be emailed to Kim Kushmerick at Comments also can be mailed to Portnoy or Kushmerick at Accounting Standards, AICPA, 1211 Avenue of the Americas, 19th Floor, New York, NY 10036.

The working drafts consist of:

  • Asset Management Issue No. 10-1: Who Is the Customer? discusses considerations for determining whether the investor or the fund is the customer in a contract with an asset manager.
  • Asset Management Issue No. 10-7: Deferred Distribution Commission Expenses (“Back-End Load Funds”) provides considerations for how an asset manager (or its mutual fund distributor subsidiary) should account for commissions paid to a mutual fund distributor for back-end load funds.
  • Aerospace & Defense Issue No. 1-1: Acceptable Measures of Progress offers items to consider when determining the appropriate method to use when measuring progress toward completion of performance obligations satisfied over time.
  • Aerospace & Defense Issue No. 1-2: Accounting for Contract Costs proposes considerations for applying the guidance in Topic 340 for incremental costs of obtaining a contract, costs to fulfill a contract, and amortization and impairment to costs typically incurred in aerospace and defense contracts, including precontract costs and learning or startup costs.
  • Aerospace & Defense Issue No. 1-3: Variable Consideration and Constraining Estimates of Variable Consideration provides considerations for determining estimates of variable consideration (incentive fees and award fees), the constraints on variable consideration, and the impact of subsequent modifications on the amount of estimated variable consideration to include in the transaction price of aerospace and defense contracts.
  • Aerospace & Defense Issue No. 1-4: Contract Existence and Related Issues for Foreign Contracts With Regulatory Contingencies and Unfunded Portions of U.S. Government Contracts discusses how required regulatory approval impacts the determination of whether certain executed/signed aerospace and defense contracts meet the criteria for existence of a contract under Topic 606, and provides considerations for applying the guidance for variable consideration to unfunded portions of U.S. government contracts.
  • Aerospace & Defense Issue No. 1-5: Transfer of Control on Non-US Federal Government Contracts offers considerations for determining if non-U.S. government aerospace and defense contracts should be considered performance obligations satisfied over time or at one point in time.
  • Aerospace & Defense Issue No. 1-12: Significant Financing Component proposes considerations needed to assess whether a significant financing component exists in determining the transaction price for various types of aerospace and defense contracts.
  • Aerospace & Defense Issue No. 1-16: Allocating the Transaction Price discusses considerations for determining how to allocate the transaction price to multiple performance obligations in aerospace and defense contracts.

Kim Kushmerick ( is an AICPA senior technical manager.

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