FASB issues standard for collaborative arrangements

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The Financial Accounting Standards Board released an accounting standards update Monday to clarify the guidance on the interaction between some types of collaborative arrangements and the new revenue recognition standard.

A collaborative arrangement is a contract in which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards, depending on the commercial success of the activity. The update offers guidance on how to determine whether some transactions between participants in such an arrangement should be accounted for under the rev rec standard.

The update also supplies more comparability in the presentation of revenue for some transactions between collaborative arrangement participants. It does this by enabling organizations to only present units of account in collaborative arrangements that are inside the scope of the rev rec standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that aren’t within the scope of the revenue recognition standard should be presented separately from revenue accounted for under the rev rec standard.

For public companies, the amendments in this ASU are effective for fiscal years starting after Dec. 15, 2019, and interim periods within those fiscal years. For all other organizations, the amendments take effect for fiscal years beginning after Dec. 15, 2020, and interim periods within fiscal years starting after Dec. 15, 2021. FASB is also permitting early adoption of the standard.

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Revenue recognition Accounting standards Financial reporting FASB