FASB Proposes Guidance on
by Dennis Howell and Rachel Grandovic, Deloitte & Touche LLP
On April 26, 2018, the FASB issued for public comment a proposed Accounting Standards
Update (ASU)1 that would amend ASC 8082 to address uncertainties related to the interaction
of that guidance with the FASB’s new revenue standard (ASC 6063).
Comments on the proposed ASU are due by June 11, 2018.
While ASC 808 defines collaborative arrangements and provides guidance on income
statement presentation, classification, and disclosures related to such arrangements, it does
not address recognition and measurement matters such as (1) how the appropriate unit of
accounting is determined or (2) when the recognition criteria are met. Thus, even when a
collaboration is within the scope of ASC 808, entities must look to other GAAP (possibly by
analogy) to determine the appropriate recognition and measurement for the activities subject
to the arrangement. In determining the accounting for these arrangements, many entities
currently apply revenue recognition guidance by analogy.
Since issuance of the new revenue standard, stakeholders have asked about the standard’s
effects on the accounting for transactions between participants in a collaborative
arrangement. They have observed that some entities currently apply revenue guidance to a portion of or all elements of an arrangement, while others establish accounting policies for the
recognition and measurement of transactions among participants — which may or may not
be consistent with revenue guidance. In response to this diversity in practice and uncertainty
about the accounting model that applies to these arrangements, the Board commenced a
project in November 2016 to clarify when transactions between partners in a collaborative
arrangement are within the scope of revenue guidance.
Key Provisions of the Proposed ASU
The proposed ASU would amend ASC 808 to:
Add guidance on determining the unit of account. Such guidance would be “limited to
when an entity is assessing the scope of [ASC] 606.”
Clarify that in the context of the unit of account, ASC 606 should apply in its entirety to
transactions within a collaborative arrangement when the counterparty is a customer.
Clarify that when a transaction is not directly related to sales to third parties,
presentation of the transaction as revenue would be precluded if the collaborative
participant counterparty is not a customer.
In addition, the proposed ASU would (1) make conforming changes to the implementation
guidance and illustrations in ASC 808 and (2) amend ASC 606 “to clarify that an entity’s
collaborative partner is not precluded from being its customer.”
Connecting the Dots
As explained in paragraph BC21 of the proposed ASU, the Board considered
providing recognition and measurement guidance for nonrevenue transactions
between collaborative participants in part because “its decisions could result in more
transactions that would need recognition and measurement guidance that does
not exist in [ASC] 808.” Although the Board decided not to propose a nonrevenue
accounting model for collaborative arrangements, it would continue to permit an
entity to apply the revenue guidance in ASC 606 by analogy or as a policy election,
and it would not require the entity to apply all the guidance in ASC 606 as long as the
transaction is not presented as revenue.
Transition and Effective Date
Entities would be required to apply the final guidance retrospectively to the date of their initial
application of ASC 606.
The FASB plans to determine an effective date for the final guidance after considering
stakeholder feedback on the proposed ASU.
Questions for Respondents
The proposed ASU’s questions for respondents are reproduced below for reference.
Question 1: Would the amendments in this proposed Update clarify when a transaction between
collaborative participants is within the scope of the revenue guidance in Topic 606? Would the
proposed amendments reduce diversity in practice in this area? If not, please explain why.
Question 2: Is additional guidance necessary to determine whether a collaborative participant is a
customer? If so, please provide suggestions.
Question 3: Are the proposed amendments on presentation in paragraph 808-10-45-3 operable?
Would the proposed amendments reduce diversity in practice in this area?
Question 4: Would the proposed amendments on the unit of account clarify that the unit-ofaccount
guidance in Topic 606 should be applied for determining if a transaction is within the scope
of Topic 606? If not, please explain why.
Question 5: Should a reporting entity be required to provide additional recurring disclosures (that
is, incremental disclosures to those required in Topic 808 and Topic 606) because of the proposed
amendments? If so, what additional recurring disclosures should be required?
Question 6: Do you agree with the proposed transition requirements, including the retrospective
application to the adoption date of Topic 606? If not, what transition method would be more
appropriate and why?
Question 7: How much time is needed to implement the proposed amendments? Should early
adoption be permitted?
Question 8: Should entities other than public business entities be provided with more time to
implement the proposed amendments? If so, how much more time?