by Kristin Bauer, Chris Chiriatti, Joe DiLeo, Lauren Hegg, Jake Manning, and Lynnsey Okada, Deloitte & Touche LLP
This TRG Snapshot summarizes the November 7, 2016, meeting of the revenue transition resource group (TRG).
For titles of FASB Accounting Standards Codification (ASC or the “Codification“) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.“
IFRS 15, Revenue From Contracts With Customers.
On January 21, 2016, the IASB announced that it completed its decision-making process related to clarifying the new revenue standard and that it no longer plans to schedule TRG meetings for IFRS constituents. However, members of the IASB board and staff may participate in TRG meetings as observers.
International Organization of Securities Commissions.
ASC 606-10-55-295 through 55-297.
The SEC observer did not explicitly accept or reject the FASB staff's statements.
ASC 606-10-25-28; paragraph BC136 of ASU 2014-09, Revenue From Contracts With Customers.
Paragraph 34 of TRG Agenda Paper 57.
Paragraph BC309 of ASU 2014-09.
Paragraph 23 of TRG Agenda Paper 23.
Certain implementation issues related to incremental costs to obtain a contract were discussed at the January 26, 2015, TRG meeting. See Deloitte’s January 2015 TRG Snapshot for more information.
Example 1 discusses a license of a trademark, which is considered symbolic IP. The example here has been adapted to omit the type of IP to illustrate the alternative views for symbolic and functional IP, as described in the agenda paper’s two questions.
As described in ASC 606-10-55-59 and 55-60, symbolic IP does not have significant stand-alone functionality; therefore, the utility of the IP is significantly derived from the entity’s past or ongoing activities undertaken to maintain or support the IP. In addition, the customer is contractually or practically required to use the latest version of the IP. Therefore, a symbolic-IP license gives the customer a right to access the entity’s IP, and revenue should generally be recognized over time.
As described in ASC 606-10-55-59 and 55-63, functional IP has significant stand-alone functionality (e.g., the ability to process a transaction, perform a function or task, or be played or aired). Because an entity’s activities do not significantly change the functionality and utility of the IP, a functional-IP license gives the customer a right to use the IP, and revenue should generally be recognized at a point in time.
ASC 606-10-32-25 through 32-27.
The scope of the issue in TRG Agenda Paper 59 is limited to payments to customers (and potential customers). It does not apply to payments made to third parties that are not customers.
Proponents of View A specifically referred by analogy to previous TRG discussions related to the scope of the guidance on consideration payable to a customer (see Deloitte’s March 2015 and July 2015 issues of TRG Snapshot), the guidance on amortizing capitalized contract costs in ASC 340-40, and the subsequent measurement guidance on intangible assets other than goodwill in ASC 350-30.
See paragraph 15(a) of TRG Agenda Paper 59.