As part of their ongoing flood of projects, the Financial Accounting Standards Board and the International Accounting Standards Board have also jointly published a draft standard to improve and align the financial reporting of revenue from contracts with customers and the related costs.
The proposed standard would replace IAS 18, Revenue, IAS 11, Construction Contracts, and related interpretations. In U.S. GAAP, it would supersede most of the guidance on revenue recognition in Topic 605 of the Accounting Standards Codification.
The core principle of the draft standard is that an entity should recognize revenue from contracts with customers when it transfers goods or services to the customer in the amount of consideration the entity receives, or expects to receive, from the customer.
In developing the proposals, the boards considered more than 220 comment letters they received on a discussion paper, in addition to feedback received from interested parties through an extensive outreach program, including workshops with preparers. The boards will undertake further outreach activities during the exposure draft's comment period to ensure that the views of all interested parties are taken into consideration when finalizing the standard.
The exposure draft, Revenue from Contracts with Customers, is open for comment until Oct. 22, 2010, and can be accessed on www.iasb.org or on www.fasb.org.
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