Chapter 18 — SEC, FASB, and Other Stakeholder Activities

18.2 SEC Activities

The SEC is a critical stakeholder given its role in both standard setting and regulating the U.S. capital markets. On August 18, 2017, the SEC staff issued SAB 116, which conforms existing SEC staff guidance with the guidance in ASC 606. As further discussed below, SAB 116 (1) supersedes both SAB Topic 13 on revenue recognition and SAB Topic 8 on retail companies and (2) modifies SAB Topic 11.A on the disclosure of operating-differential subsidies.

In addition, the SEC updated its interpretive guidance on bill-and-hold arrangements and vaccine stockpiles.

18.2.1 SAB 116 Modifications to Previously Issued SEC Staff Guidance

SAB 116 modifies previously issued SEC staff guidance as follows:

SAB Topic 13 — SAB 116 superseded SAB Topic 13 upon the adoption of ASC 606. SAB 116 notes that ASC 606 “provides a single set of revenue recognition principles governing all contracts with customers and supersedes the existing revenue recognition framework in [ASC 605], which eliminates the need for [SAB] Topic 13.” SAB 116 also states that upon adoption of ASC 606, “a registrant should no longer look to the guidance in Securities Exchange Act Release No. 23507 and Accounting and Auditing Enforcement Release No. 108 . . . for criteria to be met in order to recognize revenue” on a bill-and-hold basis.

SEC registrants should note that the bill-and-hold guidance in SAB Topic 13 (which was applicable until the adoption of ASC 606) was more detailed than the bill-and-hold guidance in ASC 606. The most noticeable distinction is that SAB Topic 13 required bill-and-hold arrangements to include a fixed delivery schedule, whereas ASC 606 does not include this requirement.
SAB Topic 8 — SAB 116 superseded SAB Topic 8 upon the adoption of ASC 606. SAB 116 notes that SAB Topic 8, which was specific to retail companies, previously provided the SEC staff’s views on “the prohibition of presenting sales of a leased or licensed department within a retailer’s statement of comprehensive income consistent with the principles codified [in ASC 605]” and “the disclosure of finance charges imposed by retailers on credit sales.” SAB 116 further states that the guidance in ASC 606 on the identification of performance obligations in a contract with a customer, the presentation of revenue as a principal (on a gross basis) or as an agent (on a net basis), and the presentation of the effects of financing in the statement of comprehensive income “eliminates the need for the guidance in [SAB] Topic 8.”
SAB Topic 11.A — SAB 116 modifies SAB Topic 11.A to clarify that “revenues from operating-differential subsidies presented under a revenue caption should be presented separately from revenue from contracts with customers accounted for under [ASC 606].” Previously, as noted in SAB 116, SAB Topic 11.A “provided the [SEC] staff’s view that revenues from operating-differential subsidies be presented as a separate line item in the income statement either under a revenue caption or as credit in the costs and expenses section.”

On November 22, 2017, the FASB issued ASU 2017-14, which rescinds certain SEC staff guidance in light of SAB 116. For additional information about ASU 2017-14, see Section 18.3.3.8.

18.2.2 Guidance on Recognizing Revenue From Vaccines Placed in a Federal Government Stockpile

On August 18, 2017, the SEC issued an interpretive release (the “2017 release”) to update the guidance in its 2005 release Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement Into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. The update was provided to bring existing guidance into conformity with ASC 606. Under the guidance in the 2017 release, vaccine manufacturers should recognize revenue when vaccines are placed into U.S. government stockpile programs because control of the vaccines has been transferred to the customer. However, these entities also need to evaluate whether storage, maintenance, or other promised goods or services associated with vaccine stockpiles are separate performance obligations. The guidance in the 2017 release applies only to the vaccine stockpile programs discussed in that release and is not applicable to any other transactions.

On November 22, 2017, the FASB issued ASU 2017-14, which rescinds certain SEC guidance in legacy U.S. GAAP and codifies in ASC 606-10-S25-1 the text of the 2017 release. For additional information about ASU 2017-14, see Section 18.3.3.8.

18.2.3 Removal of Certain SEC Observer Comments

ASU 2016-11 and ASU 2017-13 removed certain SEC observer comments from the Codification (i.e., treated them as no longer effective) upon the adoption of the revenue standard. The removed SEC observer comments include ASC 605-45-S99-1 (formerly EITF Issue 00-10), which states that (1) shipping and handling fees billed to a customer are required to be classified as revenue and (2) the classification of shipping and handling costs incurred by the seller is an accounting policy decision. It is important to note that with the removal of this comment, we generally believe that it will remain appropriate to present shipping and handling within costs of goods sold because they are considered to be fulfillment costs. However, in certain instances, it may be acceptable for an entity to present shipping and handling outside of costs of goods sold. The presentation of shipping and handling costs was discussed by Barry Kanczuker, associate chief accountant in the SEC’s Office of the Chief Accountant, in a speech at the 2017 AICPA Conference on Current SEC and PCAOB Developments, in which he stated:

Given the noted absence of any guidance, I believe an entity will need to apply reasonable judgment in determining the appropriate classification of shipping and handling expenses for those shipping and handling activities that are accounted for as activities to fulfill the promise to transfer the good. Hence, the staff noted it would not object to the following approaches. First, the staff noted that it would not object to classification of these expenses within cost of sales. Second, given that there is no explicit guidance within Topic 606 related to the classification of shipping and handling expenses, the staff noted that it also would not object to an entity continuing to apply its previous policy regarding classification of these expenses, which could potentially be outside of cost of sales. I believe that a registrant that classifies significant shipping and handling costs outside of cost of sales should consider whether it should disclose the amount of such costs and the line item or items on the income statement that include them, similar to the disclosures required under the previous guidance.

See Sections 18.3.3.4 and 18.3.3.7 for further discussion of ASU 2016-11 and ASU 2017-13, respectively, which detail the rescission of certain SEC guidance.

18.3 FASB Activities

18.3.1 TRG Update

Upon issuing the revenue standard, the FASB and IASB formed a joint revenue TRG. The purpose of the TRG is not to issue guidance but instead to seek and provide feedback on potential issues related to implementation of the revenue standard. By analyzing and discussing potential implementation issues, the TRG helps the boards determine whether they need to take additional action, such as providing clarification or issuing other guidance. The TRG comprises financial statement preparers, auditors, and users from a “wide spectrum of industries, geographic locations and public and private organizations,” and board members of the FASB and IASB attend the TRG’s meetings. In addition, representatives from the SEC, PCAOB, IOSCO, and AICPA are invited to observe the meetings.

In January 2016, the IASB announced that it completed its decision-making process related to clarifying the revenue standard and that it no longer plans to schedule TRG meetings for IFRS constituents. Therefore, starting in April 2016, the TRG meetings were FASB-only, but members of the IASB could participate as observers. However, it is important for consistency and comparability of financial information that both domestic registrants filing under U.S. GAAP and foreign private issuers filing under IFRS Accounting Standards keep abreast of TRG developments in the United States in a manner consistent with comments made by then SEC Deputy Chief Accountant Wesley Bricker at the December 2015 AICPA Conference on Current SEC and PCAOB Developments.

At the November 2016 TRG meeting — the last TRG meeting — the FASB announced that no future TRG meetings were scheduled. However, the Board encouraged stakeholders to submit implementation questions either directly to the TRG or through the FASB’s technical inquiry process.

The FASB maintains a full list of questions discussed by the TRG, with links to the relevant TRG Agenda Papers.

18.3.2 FASB Staff’s Revenue Recognition Implementation Q&As

In January 2020, the FASB issued its staff’s Revenue Recognition Implementation Q&As (the “Implementation Q&As”). Compiled from TRG Agenda Papers and other previously issued materials, the FASB staff’s Implementation Q&As are presented in a user-friendly format.

For a topical listing of issues addressed in the Implementation Q&As, see Appendix C.

18.3.3 Final ASUs

As noted above, the FASB has issued a number of ASUs to amend and clarify the guidance in the revenue standard. Largely the result of feedback provided by the TRG, the Board’s updates to the revenue standard are discussed throughout this Roadmap as applicable.

18.3.3.1 ASU 2015-14 on Deferral of the Effective Date

On August 12, 2015, the FASB issued ASU 2015-14, which deferred the effective date of the Board’s revenue standard, ASU 2014-09, by one year for all entities and permitted early adoption on a limited basis. Specifically:

For PBEs, the standard became effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption was permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods.
For nonpublic entities, the standard became effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Nonpublic entities were permitted to early adopt the standard as of the following:
- Annual reporting periods beginning after December 15, 2016, including interim periods.
- Annual reporting periods beginning after December 15, 2016, and interim periods within annual reporting periods beginning one year after the annual reporting period in which the standard was initially applied.

On June 3, 2020, the FASB issued ASU 2020-05, which permitted nonpublic entities (i.e., entities that are not PBEs) that had not yet issued their financial statements or made financial statements available for issuance as of June 3, 2020, to adopt ASC 606 for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020. See Section 18.3.3.12 for further details.

18.3.3.2 ASU 2016-08 on Principal-Versus-Agent Considerations

On March 17, 2016, the FASB issued ASU 2016-08, which amended the principal-versus-agent implementation guidance and illustrations in the revenue standard. The FASB issued the ASU in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s control principle.

Key provisions of the ASU include:

Assessing the nature of the entity’s promise to the customer — When a revenue transaction involves a third party in providing goods or services to a customer, the entity must determine whether the nature of its promise to the customer is to provide the underlying goods or services (i.e., the entity is the principal in the transaction) or to arrange for the third party to provide the underlying goods or services (i.e., the entity is the agent in the transaction). See Section 10.1 for further details.
Identifying the specified goods or services — The ASU clarified that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore, for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods or services and the agent for others. See Section 10.1.1 for further details.
Application of the control principle — To help an entity determine whether it controls a specified good or service before the good or service is transferred to the customer (and therefore determine whether it is the principal), the ASU added ASC 606-10-55-37A. See Section 10.2 for further details.
Indicators of control — The ASU removed from the revenue standard two of the five indicators used in the evaluation of control (i.e., exposure to credit risk and whether consideration is in the form of a commission). In addition, the ASU reframed the remaining three indicators to help an entity determine when it is acting as a principal rather than as an agent. Further, the ASU added language to the indicators that explains how they are related to the control principle under the revenue standard. See Section 10.2 for further details.

18.3.3.3 ASU 2016-10 on Identifying Performance Obligations and Licensing

On April 14, 2016, the FASB issued ASU 2016-10, which amended certain aspects of the revenue standard, specifically the standard’s guidance on identifying performance obligations and the implementation guidance on licensing. The amendments in the ASU reflect feedback received by the TRG.

ASU 2016-10 amended the revenue standard as follows:

Identifying performance obligations:
- Immaterial promised goods or services — Entities may disregard goods or services promised to a customer that are immaterial in the context of the contract. See Section 5.2.3 for further details.
- Shipping and handling activities — Entities can elect to account for shipping or handling activities occurring after control of the related good has passed to the customer as a fulfillment cost rather than as a revenue element (i.e., a promised service in the contract). See Section 5.2.4.3 for further details.
- Identifying when promises represent performance obligations — ASU 2016-10 refined the revenue standard’s separation criteria for assessing whether promised goods and services are distinct, specifically the “separately identifiable” principle (the “distinct within the context of the contract” criterion) and supporting factors. See Section 5.3.2.2 for further details.
Licensing implementation guidance:
- Determining the nature of an entity’s promise in granting a license — Intellectual property (IP) is classified as either functional or symbolic, and such classification should generally dictate whether, for a license granted to that IP, revenue must be recognized at a point in time or over time, respectively. See Section 12.4 for further details.
- Sales- or usage-based royalties — The sales- or usage-based royalty exception applies whenever the royalty is predominantly related to a license of IP. ASU 2016-10 therefore indicates that an “entity should not split a sales-based or usage-based royalty into a portion subject to the recognition guidance on sales-based and usage-based royalties and a portion that is not subject to that guidance.” See Section 12.7 for further details.
- Restrictions of time, geographic location, and use — ASU 2016-10’s examples illustrate the distinction between restrictions that represent attributes of a license and provisions that specify that additional licenses (i.e., additional performance obligations) have been promised. See Section 12.3.2 for further details.
- Renewals of licenses that provide a right to use IP — Revenue should not be recognized for renewals or extensions of licenses to use IP until the renewal period begins. See Section 12.6 for further details.

18.3.3.4 ASU 2016-11 on Rescission of SEC Guidance Because of ASUs 2014-09 and 2014-16

On May 3, 2016, the FASB issued ASU 2016-11, which rescinded certain SEC guidance in light of ASUs 2014-09 and 2014-16. Specifically, ASU 2016-11 rescinded the following SEC guidance upon the adoption of ASU 2014-09:

ASC 605-20-S99-2 (formerly EITF Issue 91-9) on revenue and expense recognition for freight services in process.
ASC 605-45-S99-1 (formerly EITF Issue 00-10) on accounting for shipping and handling fees and costs.
ASC 605-50-S99-1 (formerly EITF Issue 01-9) on accounting for consideration given by a vendor to a customer.
ASC 932-10-S99-5 (formerly EITF Issue 90-22) on accounting for gas-balancing arrangements.

18.3.3.5 ASU 2016-12 on Narrow-Scope Improvements and Practical Expedients

On May 9, 2016, the FASB issued ASU 2016-12, which amended certain aspects of ASU 2014-09. The amendments address certain implementation issues identified by the TRG and clarify, rather than change, the revenue standard’s core revenue recognition principles. Changes include the following:

Collectibility — ASU 2016-12 clarified the objective of the entity’s collectibility assessment and provided additional guidance on when an entity would recognize as revenue consideration it receives if the entity concludes that collectibility is not probable. See Section 4.3.5.3 for further details.
Presentation of sales taxes and other similar taxes collected from customers — Entities are permitted to present revenue net of sales taxes collected on behalf of governmental authorities (i.e., to exclude from the transaction price sales taxes that meet certain criteria). See Section 6.7 for further details.
Noncash consideration — An entity’s calculation of the transaction price for contracts containing noncash consideration would include the fair value of the noncash consideration to be received as of the contract inception date. Further, subsequent changes in the fair value of noncash consideration after contract inception would be included in the transaction price as variable consideration (subject to the variable consideration constraint) only if the fair value varies for reasons other than its form. See Section 6.5 for further details.
Contract modifications and completed contracts at transition — The ASU established a practical expedient for contract modifications at transition and defined completed contracts as those for which all (or substantially all) revenue was recognized under the applicable revenue guidance before the revenue standard was initially applied.
Transition technical correction — Entities electing to use the full retrospective transition method to adopt the revenue standard were no longer required to disclose the effect of the change in accounting principle on the period of adoption (as historically required by ASC 250-10-50-1(b)(2)); however, entities were still required to disclose the effects on preadoption periods that were retrospectively adjusted.

18.3.3.6 ASU 2016-20 on Technical Corrections and Improvements

On December 21, 2016, the FASB issued ASU 2016-20, which amended certain aspects of ASU 2014-09 and includes technical corrections intended to clarify, rather than change, the revenue standard’s core revenue recognition principles.

Key provisions of the amendments are summarized in the table below, which is reproduced from ASU 2016-20.

Area for Correction or Improvement	Summary of Amendments
Issue 1: Loan Guarantee Fees
Topic 606 specifically identifies a scope exception for guarantees (other than product or service warranties) within the scope of Topic 460, Guarantees. Stakeholders indicated that a few consequential amendments included in Update 2014-09 are inconsistent on whether fees from financial guarantees are within the scope of Topic 606.	The amendments in this Update clarify that guarantee fees within the scope of Topic 460 (other than product or service warranties) are not within the scope of Topic 606. Entities should see Topic 815, Derivatives and Hedging, for guarantees accounted for as derivatives.
Issue 2: Contract Costs — Impairment Testing
Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers, includes impairment guidance for costs capitalized in accordance with the recognition provisions of that Subtopic. Stakeholders raised some questions about the impairment testing of those capitalized costs.	The amendments in this Update clarify that when performing impairment testing an entity should (a) consider expected contract renewals and extensions and (b) include both the amount of consideration it already has received but has not recognized as revenue and the amount it expects to receive in the future.
Issue 3: Contract Costs — Interaction of Impairment Testing With Guidance in Other Topics
Some stakeholders raised questions about the interaction of the impairment testing in Subtopic 340-40 with guidance in other Topics.	The amendments in this Update clarify that impairment testing first should be performed on assets not within the scope of Topic 340, Topic 350, Intangibles — Goodwill and Other, or Topic 360, Property, Plant, and Equipment (such as Topic 330, Inventory), then assets within the scope of Topic 340, then asset groups and reporting units within the scope of Topic 360 and Topic 350.
Issue 4: Provisions for Losses on Construction-Type and Production-Type Contracts
When issuing Update 2014-09, the Board decided to exclude specific guidance in Topic 606 for onerous contracts. However, the Board decided to retain the guidance on the provision for loss contracts in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts. In the consequential amendments of Update 2014-09, the testing level was changed to the performance obligation level (from the segment level). Stakeholders indicated that this amendment, in some circumstances, may require an entity to perform the loss assessment at a lower level than legacy practice.	The amendments in this Update require that the provision for losses be determined at least at the contract level. However, the amendments allow an entity to determine the provision for losses at the performance obligation level as an accounting policy election.
Issue 5: Scope of Topic 606
In Topic 606, a scope exception exists for insurance contracts within the scope of Topic 944, Financial Services — Insurance. The Board’s intention was to exclude from Topic 606 all contracts that are within the scope of Topic 944, not only insurance contracts (for example, investment contracts that do not subject an insurance entity to insurance risk).	The amendments in this Update remove the term insurance from the scope exception to clarify that all contracts within the scope of Topic 944 are excluded from the scope of Topic 606.
Issue 6: Disclosure of Remaining Performance Obligations
Topic 606 requires an entity to disclose information about its remaining performance obligations, including the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period. Topic 606 also includes optional exemptions from that disclosure for contracts with an original duration of one year or less and performance obligations in which revenue is recognized in accordance with paragraph 606-10-55-18. Stakeholders questioned whether the Board intended for an entity to estimate variable consideration for disclosure in other circumstances in which an entity is not required to estimate variable consideration to recognize revenue.	The amendments in this Update provide optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. The amendments in this Update also expand the information that is required to be disclosed when an entity applies one of the optional exemptions.[1]
Issue 7: Disclosure of Prior-Period Performance Obligations
Topic 606 requires an entity to disclose revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods. Stakeholders indicated that the placement of the disclosure in the Codification results in confusion about whether this disclosure applies only to performance obligations with corresponding contract balances or to all performance obligations.	The amendments in this Update clarify that the disclosure of revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods applies to all performance obligations and is not limited to performance obligations with corresponding contract balances.
Issue 8: Contract Modifications Example
Example 7 in Topic 606 illustrates the application of the guidance on contract modifications. Some stakeholders perceived minor inconsistencies with the contract modifications guidance in Topic 606.	The amendments in this Update better align Example 7 with the principles in Topic 606.
Issue 9: Contract Asset Versus Receivable
Example 38, Case B in Topic 606 illustrates the application of the presentation guidance on contract assets and receivables. Some stakeholders expressed concern that the example indicates that an entity cannot record a receivable before its due date.	The amendments in this Update provide a better link between the analysis in Example 38, Case B and the receivables presentation guidance in Topic 606.
Issue 10: Refund Liability
Example 40 in Topic 606 illustrates the recognition of a receivable and a refund liability. Some stakeholders expressed concern that the example indicates that a refund liability should be characterized as a contract liability.	The amendment in this Update removes the reference to the term contract liability from the journal entry in Example 40.
Issue 11: Advertising Costs
Update 2014-09 supersedes much of the guidance in Subtopic 340-20, Other Assets and Deferred Costs — Capitalized Advertising Costs, because it would have conflicted with new cost capitalization guidance in Subtopic 340-40. Therefore, an entity that previously capitalized advertising costs in accordance with the guidance in Subtopic 340-20 would apply the capitalization guidance in Subtopic 340-40 upon the adoption of Update 2014-09. Guidance on when to recognize a liability had been included within Subtopic 340-20 and was inadvertently superseded by Update 2014-09.	The amendments in this Update reinstate the guidance on the accrual of advertising costs and also move the guidance to Topic 720, Other Expenses.
Issue 12: Fixed-Odds Wagering Contracts in the Casino Industry
Subtopic 924-605, Entertainment — Casinos — Revenue Recognition, [historically included] explicit guidance that [identified] fixed-odds wagering as gaming revenue. That industry-specific guidance was superseded by Update 2014-09, along with nearly all existing industry-specific revenue guidance in GAAP. Therefore, some stakeholders questioned whether fixed-odds wagering contracts are within the scope of Topic 606 or, rather, whether they should be accounted for as derivatives within the scope of Topic 815.	The amendments in this Update (a) create a new Subtopic 924-815, Entertainment — Casinos — Derivatives and Hedging, which includes a scope exception from derivatives guidance for fixed-odds wagering contracts and (b) includes a scope exception within Topic 815 for fixed-odds wagering contracts issued by casino entities.
Issue 13: Cost Capitalization for Advisors to Private Funds and Public Funds
A consequential amendment included in Update 2014-09 moved cost guidance from Subtopic 946-605, Financial Services — Investment Companies — Revenue Recognition, to Subtopic 946-720, Financial Services — Investment Companies — Other Expenses. This amendment was intended to move the guidance only and was not intended to change practice. However, the consequential amendment in Update 2014-09 could have resulted in inconsistent accounting for offering costs among advisors to public funds and private funds.	The amendments in this Update align the cost-capitalization guidance for advisors to both public funds and private funds in Topic 946.

ASU 2016-20 is based on two proposed ASUs. All except one of the amendments proposed in those exposure drafts are included in the final ASU. For the exception, which addresses preproduction costs related to long-term supply arrangements, the FASB subsequently decided to discontinue reconsideration of that topic because the Board concluded that additional guidance was not necessary. For more information about accounting for preproduction costs of a long-term supply arrangement, see Section 13.3.4.

18.3.3.7 ASU 2017-13 on Amendments to SEC Paragraphs and Rescission of Prior SEC Staff Announcements and Observer Comments

On September 29, 2017, the FASB issued ASU 2017-13, which amended the transition guidance in ASC 606-10-65 to include the SEC staff announcement at the July 20, 2017, EITF meeting regarding the ability of certain PBEs to use the non-PBE effective date when adopting the revenue standard.

In addition, ASU 2017-13 rescinded the SEC staff guidance in ASC 605-20-S99-1 (formerly EITF Topic D-96) on accounting for management fees based on a formula upon adoption of the revenue standard.

18.3.3.8 ASU 2017-14 on Amendments to SEC Paragraphs Pursuant to SAB 116 and SEC Release No. 33-10403

On November 22, 2017, the FASB issued ASU 2017-14, which codified certain SEC guidance on revenue and rescinds other such guidance that is superseded. Specifically, the ASU codified in ASC 606-10-S25-1 the text of the SEC’s 2017 release on recognizing revenue from vaccines placed in a federal government stockpile and rescinded the legacy SEC guidance in ASC 605-15-S99-1 on this topic. For more information about the SEC’s 2017 release, see Section 18.2.2.

In addition, ASU 2017-14 rescinded certain SEC staff guidance in light of SAB 116. As discussed in Section 18.2.1, SAB 116 rendered SAB Topics 8 and 13 inapplicable upon the adoption of ASC 606. Accordingly, ASU 2017-14 rescinded the following SEC staff guidance upon the adoption of ASU 2014-09:

ASC 605-10-S99-1, in which the text of SAB Topic 13 was codified to reflect the SEC staff’s views on general recognition guidance.
ASC 605-15-S99-2, in which the text of SAB Topic 8.A was codified to reflect the SEC staff’s views on retailers’ recognition of revenue from (1) sales of leased or licensed departments and (2) fees on commissions in a service arrangement.
ASC 605-15-S99-3, in which the text of SAB Topic 8.B was codified to reflect the SEC staff’s views on disclosures related to finance charges imposed by department stores and other retailers on credit sales.

Further, ASU 2017-14 amended ASC 220-10-S99-7 to reflect SAB 116’s amendments to SAB Topic 11.A, as discussed in Section 18.2.1. Those amendments to SAB Topic 11.A clarify that operating-differential subsidies presented under a revenue caption must be presented separately from revenue from contracts with customers accounted for under ASC 606.

18.3.3.9 ASU 2018-08 on Accounting for Contributions Received and Made

On June 21, 2018, the FASB issued ASU 2018-08, which clarified the scope and accounting guidance for contributions received and made. Specifically, the ASU indicates that its amendments are intended, in part, to help entities evaluate “whether transactions should be accounted for as contributions (nonreciprocal transactions) within the scope of [ASC 958] or as exchange (reciprocal) transactions subject to other guidance,” such as ASC 606. The ASU explains that while the issues it aims to address have been long-standing, “the amendments in [ASU 2014-09] place an increased focus on the issues because those amendments add new disclosure requirements and eliminate certain limited exchange transaction guidance that was previously contained in [ASC] 958-605.”

18.3.3.10 ASU 2018-18 on Clarifying the Interaction Between ASC 808 and ASC 606

On November 5, 2018, the FASB issued ASU 2018-18, which made targeted improvements to the guidance on collaborative arrangements in ASC 808. See Section 3.2.9 for further discussion of collaborative arrangements and the ASU’s amendment to ASC 606-10-15-3.

18.3.3.11 ASU 2019-08 on Share-Based Consideration Payable to a Customer

On November 11, 2019, the FASB issued ASU 2019-08, which clarified the accounting for share-based payments issued as consideration payable to a customer in accordance with ASC 606. Under the ASU, entities apply the guidance in ASC 718 to measure and classify share-based payments issued to a customer that are not in exchange for a distinct good or service (i.e., share-based sales incentives). See Section 6.6 for further details.

18.3.3.12 ASU 2020-05 on Deferral of the Effective Date for Certain Entities

On June 3, 2020, the FASB issued ASU 2020-05, which amended the effective dates of the Board’s standards on revenue (ASC 606) and leasing (ASC 842) to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the COVID-19 pandemic. Specifically, the Board deferred the effective dates of (1) ASC 606 for private companies and private not-for-profit entities and (2) ASC 842 for private companies, private not-for-profit entities, and public not-for-profit entities. Nonpublic entities (i.e., entities that are not PBEs) were permitted to adopt ASC 606 for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020. However, the deferrals applied only if those entities had not yet issued their financial statements (or made their financial statements available for issuance) as of June 3, 2020.

18.3.3.13 ASU 2021-02 on Practical Expedient for Private-Company Franchisors on the Identification of Performance Obligations

On January 28, 2021, the FASB issued ASU 2021-02, which allows a franchisor that is not a PBE (a “private-company franchisor”) to use a practical expedient when identifying performance obligations in its contracts with customers (i.e., franchisees) under ASC 606. When using the practical expedient, a private-company franchisor that has entered into a franchise agreement would treat certain preopening services provided to its franchisee as distinct from the franchise license. In addition, a private-company franchisor that applies the practical expedient must make a policy election to either (1) apply the guidance in ASC 606 to determine whether the preopening services that are subject to the practical expedient are distinct from one another or (2) account for those preopening services as a single performance obligation. The practical expedient and policy election are intended to reduce the cost and complexity of applying ASC 606 to preopening services associated with initial franchise fees. See Section 5.3.5 for further details.

18.3.3.14 ASU 2021-08 on Contract Assets and Contract Liabilities From Contracts With Customers Acquired in a Business Combination

In October 2021, the FASB issued ASU 2021-08, which amended ASC 805 to address inconsistencies and diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination. The ASU requires an entity to apply the guidance in ASC 606 when recognizing and measuring contract assets and contract liabilities arising from those contracts. See Section 3.2.13 for further details.

18.3.4 Postimplementation Review

After the FASB issues a major new accounting standard, it begins a postimplementation review (PIR) process to evaluate whether the standard is achieving its objective by providing users of financial statements with relevant information that justifies the costs of providing it. This process enables the Board to solicit and consider stakeholder input and FASB staff research.

The FASB is currently performing a PIR of the revenue standard. The PIR process is conducted in three stages: (1) post-issuance-date implementation monitoring, (2) post-effective-date evaluation of costs and benefits, and (3) summary of research and reporting. The first stage of the revenue standard’s PIR consisted of various activities, including public meetings of the TRG, responses to technical inquiries, public webcasts, and the issuance of multiple ASUs to address effective-date deferrals and clarification or simplification of the revenue standard.2

The FASB staff has completed most of its PIR outreach and research. At the July 28, 2021, and September 21, 2022, FASB meetings, the Board discussed feedback received and research performed to date on the revenue standard. In handouts prepared for the Board’s July 2021 and September 2022 meetings, the FASB staff noted that stakeholder feedback on the revenue standard was positive overall, particularly from users of financial statements since the standard results in more useful and transparent information, improved disclosures, and comparability across entities and industries. The staff further observed that while many preparers noted significant one-time costs associated with implementation of the standard, they also highlighted that the standard has been beneficial in the long run. Since the Board’s July 2021 meeting, the FASB staff has performed research on various topics identified during its post-effective-date stakeholder outreach, including (1) principal-versus-agent considerations, (2) licensing, (3) variable consideration, (4) short-cycle manufacturing, and (5) disclosures. Although applying the revenue standard in these areas still requires significant judgment, additional standard setting is not currently on the FASB’s technical agenda and may not occur as a result of the FASB staff’s research.

The FASB staff will continue to monitor implementation of the revenue standard and provide updates to the Board on any emerging issues identified. As the PIR of the revenue standard progresses, the Board and its staff may identify areas of improvement that could result in future standard setting.

Footnotes

[1]

At its October 19, 2016, meeting, the FASB redeliberated its original technical correction on disclosures of remaining performance obligations, which was discussed at the August 31, 2016, meeting but for which no tentative decision was reached. At the October 19 meeting, the staff presented five alternatives on the issue, which were compiled after additional outreach was performed at the request of the Board. After extensive deliberation, the Board ultimately decided to move forward with the amendments as originally proposed. However, the Board noted the importance of monitoring adoption of the disclosure requirements to determine what information preparers were disclosing and what information investors were using so that the Board could assess whether additional amendments were necessary once implementation reviews were completed.

See Section 18.3.3 for an overview of the ASUs issued.