SUMMARY OF BOARD DECISIONS

Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

February 1, 2011 FASB/IASB Joint Videoconference Board Meeting

Revenue recognition. The FASB and the IASB continued their redeliberations of the Exposure Draft, Revenue from Contracts with Customers, by discussing the accounting for warranties.

The Boards decided that an entity should account for some warranties as a warranty obligation (that is, as a cost accrual) in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, or FASB Accounting Standards Codification® Topic 450, Contingencies. To determine which warranties an entity would account for as a cost accrual, the Boards decided that:
  1. If a customer has the option to purchase a warranty separately from the entity, the entity should account for the warranty as a separate performance obligation. Hence, the entity would allocate revenue to the warranty service.
     
  2. If a customer does not have the option to purchase a warranty separately from the entity, the entity should account for the warranty as a cost accrual unless the warranty provides a service to the customer in addition to assurance that the entity’s past performance was as specified in the contract (in which case the entity would account for the warranty service as a separate performance obligation).
The Boards also decided to develop implementation guidance to help an entity determine when a warranty provides a service to the customer in addition to assurance that the entity’s past performance was as specified in the contract.


Leases.

Definition of a lease

The IASB and the FASB discussed the definition of a lease and how to distinguish between a lease contract and a service contract. Using some examples, the Boards discussed the application of the following principles to identify a lease:
  1. Fulfilment of the contract depends on the supplier (lessor) providing a specified asset.
     
  2. The contract conveys to the customer (lessee) the right to control the use of the specified asset.
The Boards will continue their discussions at a future joint meeting.

This session was for education only, and thus the Boards did not make any technical decisions.


February 2, 2011 FASB/IASB Joint Videoconference Board Meeting

Revenue recognition.


Insurance contracts.