FASB Issues Proposal and Invitation to Comment on the Recognition and Measurement of Deferred Revenue in Business Combinations

The FASB has issued a proposed Accounting Standards Update (ASU), Business Combinations (Topic 805): Revenue From Contracts With Customers — Recognizing an Assumed Liability (a consensus of the FASB Emerging Issues Task Force), and an Invitation to Comment (ITC), Measurement and Other Topics Related to Revenue Contracts With Customers Under Topic 805.

The proposed ASU would “require that an entity (acquirer) recognize a liability assumed in a business combination from a contract with a customer if that liability represents an unsatisfied performance obligation under Topic 606 for which the acquiree has received consideration (or the amount is due) from the customer.”

The ITC was issued to obtain feedback from stakeholders on “payment terms and their effect on the subsequent revenue recognized” and “the costs to fulfill a performance obligation in measuring the fair value of a contract liability for a revenue contract under Topic 805.”

Comments on the proposed ASU and ITC are due by April 30, 2019. For more information, see the press release, proposed ASU, and ITC on the FASB’s Web site.