The Financial Accounting Standards Board has issued a proposed accounting standards update to improve the guidance on collectibility, noncash consideration, and completed contracts at transition in the new revenue recognition standard.
The amendments in the proposed update would also provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers.
FASB is encouraging stakeholders to review and provide comment on the proposed accounting standards update, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, by Nov. 16, 2015.
FASB and the International Accounting Standards Board released the long awaited converged revenue recognition standard last year, but after hearing from many companies that they weren’t ready to implement the standard, have both decided to delay the effective date for a year until 2018, with earlier application permitted for companies that are prepared (see FASB Makes It Official on Deferral of Revenue Recognition). The two boards set up a Transition Resource Group to deal with implementation of the new standard and, in response to some of the concerns raised, have also proposed amendments to other areas, such as licensing revenue and principal vs. agent performance obligations (see FASB Proposes to Clarify Revenue Recognition Standard).
The latest clarifications are not completely in sync with those of the IASB. “The amendments in this proposed Update are not identical to those proposed by the IASB, and some are incremental to the amendments proposed by the IASB,” said FASB’s proposal. “The FASB expects that the amendments in this proposed Update would not result in financial reporting outcomes that are significantly different from those reported under IFRS for similar transactions.”
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