FASB Proposes Clarifications to the Guidance on Consideration Payable to a Customer (October 27, 2026)

FASB Proposes Clarifications to the Guidance on Consideration Payable to a Customer

Overview

On October 22, 2026, the FASB issued a proposed ASU 1 that would amend the guidance in ASC 6062 to clarify when payments that an entity makes on behalf of a customer, or to a customer of the entity’s customer, should be accounted for as consideration payable to a customer. The proposal is intended to reduce the diversity in practice that arises when economically similar payments are accounted for either as reductions of revenue or as expenses.

As stated in the proposed ASU, the proposed amendments “would apply to all entities that make payments on behalf of a customer, or to a customer of an entity’s customer, in connection with a revenue contract accounted for under Topic 606.” The proposed amendments are expected to primarily affect entities making such payments to parties outside their direct distribution chain, including platform companies that provide incentives to transact on their platform. The proposed ASU would clarify that various payments made on behalf of customers, such as those made by a retailer to a third-party bank to provide promotional financing to the retailer’s customers, should be accounted for as consideration payable to a customer. Under the proposal, the accounting analysis would focus on whether a payment made by an entity (1) was explicitly promised or (2) is consideration that the entity’s customer would have reasonably expected the entity to pay because of an implicit promise or an in-substance price concession. The proposed ASU would not otherwise change the existing accounting for consideration payable to a customer, including the assessment of whether a payment is in exchange for a distinct good or service.

Comments on the proposed ASU are due by November 23, 2026.

Background

Under ASC 606-10-32-25 through 32-27, payments to an entity’s customers, or to other parties that purchase the entity’s goods or services from those customers, are accounted for as consideration payable to a customer. Such consideration reduces the transaction price and, therefore, revenue unless the payment is in exchange for a distinct good or service that the customer transfers to the entity. However, ASC 606 does not explicitly address when this guidance applies to payments made on behalf of a customer or to a customer of the entity’s customer that is outside the entity’s direct distribution chain. In these arrangements, the recipient of the payment does not purchase the entity’s goods or services directly from the entity or indirectly through the entity’s customer.

As noted in paragraph BC6 of the proposed ASU, questions about these payments often arise “in platform and intermediary business models in which an entity provides incentives . . . directly to end users . . . even though the entity’s contractual customer is a merchant, seller, or service provider.” For example, when a platform company arranges for its customer, a merchant, to sell goods to end users on its platform, and the platform company provides those end users with a credit on their first purchase through the platform, the payments may benefit the merchant even though the merchant does not directly receive the consideration paid to the end users. There is diversity in practice in accounting for such payments, resulting in the presentation of potentially economically similar payments as either (1) reductions of revenue or (2) expenses.

To address this diversity in practice, the Emerging Issues Task Force (EITF) recommended at its June 23, 2026, meeting that the FASB add a project on consideration payable to a customer to the Board’s technical agenda. The EITF further recommended that payments made on behalf of a customer, or to a customer of an entity’s customer, should be evaluated as consideration payable to a customer when there is either (1) an explicit or implicit promise to the customer that such payments would be made or (2) the payment represents an in-substance price concession to the customer such that there is a reasonable expectation that the payment will be made to the customer’s customer. The EITF observed that the recommendations were generally consistent with current practice based on speeches made by the SEC staff. The EITF also recommended that proposed changes to the guidance on consideration payable to a customer should apply to all entities and should be requirements rather than elections.

On the basis of recommendations from the EITF and stakeholders, the Board decided at its August 19, 2026, meeting to add to its technical agenda a project to address when payments made on behalf of a customer, or to a customer of an entity’s customer, should be accounted for as consideration payable to a customer under ASC 606.

Main Provisions of the Proposed ASU

Identification of Payments as Consideration Payable to a Customer

The proposed amendments would revise the measurement guidance on determining the transaction price in ASC 606-10-32-25 to refer to added Codification paragraphs ASC 606-10-32-25B and 32-25C for guidance on payments made on behalf of a customer or to a customer of an entity’s customer.

Proposed ASC 606-10-32-25B would clarify that consideration payable to a customer “includes payments made on behalf of a customer, or to a customer of an entity’s customer, that are made in connection with an entity satisfying its promise to its customer.”

Proposed ASC 606-10-32-25C would explicitly provide that a payment is made in connection with an entity’s satisfying its promise to a customer if (1) there is an explicit promise to make a payment or (2) the “customer has a reasonable expectation that the entity will make a payment . . . because either an implicit promise exists or the payment represents an in-substance price concession.” In addition, proposed ASC 606-10-32-25C would clarify that (1) a “promise may be implied by an entity’s customary business practices, published policies, or specific statements” and (2) “[e]xamples of payments representing in-substance price concessions include but are not limited to incentives, rebates, credits, and direct cash payments.”

Connecting the Dots

The proposed amendments would not introduce a new concept. Rather, they would codify an assessment that is consistent with the SEC staff’s previously stated views on payments made on behalf of customers. At the 2021 AICPA & CIMA Conference on Current SEC and PCAOB Developments, the SEC staff observed that an entity acting as a seller’s agent should consider whether it has made an implicit or explicit promise to provide incentives to end users on the seller’s behalf and whether incentives are an in-substance price concession because the seller has a valid expectation that the entity will provide the incentives to the end users. See Section 6.6.1.1 of Deloitte’s Roadmap Revenue Recognition for considerations related to identifying customers within the scope of the guidance on consideration payable to a customer.

The proposed amendments are intended only to identify which payments made on behalf of a customer, or to a customer of an entity’s customer, should be evaluated under the guidance on consideration payable to a customer. They would not change the accounting once a payment is identified — including the determination of whether the payment is in exchange for a distinct good or service under ASC 606-10-25-19 through 25-22. That is, after concluding that a payment is consideration payable to a customer, an entity would continue to apply the guidance in ASC 606-10-32-25 through 32-27 as it does currently.

Connecting the Dots

As noted in paragraph BC20 of the proposed ASU, “[n]egative revenue can arise when consideration payable to a customer reduces revenue in an amount that exceeds consideration received from the customer,” and “Topic 606 does not explicitly address whether such amounts should continue to be presented as negative revenue or instead be reclassified as an expense.” Because the proposed amendments may result in the treatment of more payments as a reduction of revenue, they could increase the prevalence of negative revenue. The Board did not propose guidance on this topic, but it included a specific question for respondents (see Question 4, which is reproduced in the Appendix) to obtain feedback on the need for standard setting regarding the accounting for negative revenue.

Scope

The Board decided that the amendments would apply to all entities.

Proposed Illustrative Examples (Proposed ASC 606-10-55-254A Through 55-254G)

The proposed ASU would add Example 32A and Example 32B (both reproduced below) to the implementation guidance in ASC 606-10-55 to assist with the application of the proposed amendments to common fact patterns. These illustrative examples would help an entity identify (1) explicit and implicit promises to make payments to a customer of the entity’s customer and (2) payments made on behalf of a customer.

Example 32A, Case A — Explicit Promises

ASC 606-10

Pending Content (Transition Guidance: ASC 606-10-65-4)

Example 32A — Payments Made to a Customer of an Entity’s Customer

Case A — Explicit Promises

55-254A An entity, a platform company, acts as an agent and arranges for goods to be provided by sellers to buyers in exchange for a percentage of the total price charged for each order. As part of the written contract between the entity and a seller, the entity agrees to provide incentives to buyers in the form of a $10 credit when a buyer purchases a good from the seller for the first time on the platform. The seller is aware of the credits and expects that the credits will be provided to the first-time buyers of its goods.

55-254B The entity identifies sellers as its customers and does not identify buyers as its customers. The contract meets the criteria in paragraph 606-10-25-1, and the entity accounts for the contract with the customer in accordance with the guidance in this Topic.

55-254C The entity’s promise to provide credits to buyers that are the customers of the entity’s customer (that is, the seller’s customers) represents an explicit contractual promise to the seller (see paragraphs 606-10-32-25B and 606-10-32-25C(a)). Therefore, the entity concludes that the credits are consideration payable to a customer, and the entity should evaluate paragraphs 606-10-32-25 through 32-27 to determine how to account for those credits, including whether the credits are in exchange for a distinct good or service.

Example 32A, Case A, above illustrates a scenario in which a platform company accounts for an explicit contractual promise to make payments to buyers who are customers of the platform company’s customer as consideration payable to a customer even though the buyers are not the platform company’s customers.

Example 32A, Case B — Implicit Promises

ASC 606-10

Pending Content (Transition Guidance: ASC 606-10-65-4)

Example 32A — Payments Made to a Customer of an Entity’s Customer

Case B — Implicit Promises

55-254D Assume the same facts as in Case A, except that the written contract between the entity and the seller does not explicitly require that the entity provide the credits to the buyers upon the first purchase of the seller’s goods. However, the entity typically offers a $10 credit upon the first purchase of any goods listed on its platform and markets the availability of credits to first-time buyers.

55-254E The seller can access the entity’s marketing materials and is aware that credits are being offered to buyers (that is, the seller’s customers) to attract first-time buyers to the entity’s platform. Although those credits are not explicitly required in the written contract between the entity and the seller, the seller reasonably expects that the entity will provide credits to first-time buyers as an incentive to purchase the seller’s goods through the entity’s platform because the entity’s customary business practices and published marketing materials have created an implicit promise that it will do so (see paragraphs 606-10-32-25B and 606-10-32-25C(b)). Therefore, the entity concludes that the credits are consideration payable to a customer, and the entity should evaluate paragraphs 606-10-32-25 through 32-27 to determine how to account for those credits, including whether the credits are in exchange for a distinct good or service.

Example 32A, Case B, above illustrates that an explicit requirement is not necessary for a payment to be consideration payable to a customer. The platform company’s customary business practices and marketing materials create an implicit promise that gives the seller (the platform company’s customer) a reasonable expectation that a payment will be made.

Example 32B — Payments Made on Behalf of a Customer

ASC 606-10

Pending Content (Transition Guidance: ASC 606-10-65-4)

Example 32B — Payments Made on Behalf of a Customer

55-254F An entity, a retailer, is offering a promotional 0 percent interest rate for 6-month financing to customers that purchase more than $2,000 of goods and obtain financing through Bank A. As part of the promotion, the entity agrees to pay Bank A an amount equivalent to the market interest rate for six-month loans on behalf of eligible customers. Bank A underwrites and issues the loans. The entity does not have control over Bank A’s underwriting process and is only able to pay interest on behalf of a customer if the loan is approved by Bank A.

55-254G The interest payments are made on behalf of a customer and represent an in-substance price concession to enable eligible customers to obtain a financing benefit on qualifying purchases (see paragraphs 606-10-32-25B and 606-10-32-25C(b)). Therefore, the entity concludes that the interest payments made on behalf of the customer to Bank A are consideration payable to a customer, and the entity should evaluate paragraphs 606-10-32-25 through 32-27 to determine how to account for the interest payments, including whether the interest payments are in exchange for a distinct good or service.

Example 32B above illustrates that a payment to a third party can be consideration payable to a customer when it is made on the customer’s behalf and represents an in-substance price concession because it enables the customer to obtain a benefit on its purchase. See Section 6.6.1.2 of Deloitte’s Roadmap Revenue Recognition for further discussion on identifying payments made on behalf of a customer as consideration payable to a customer.

Effective Date and Transition

Effective Date

The Board will determine the effective date after considering stakeholder feedback on the proposed amendments.

As stated in the proposed ASU, “[e]arly adoption would be permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance.” Entities that choose to adopt the proposed ASU in an interim reporting period would be required to apply its amendments “as of the beginning of the annual reporting period that includes that interim reporting period.”

Transition

An entity would be permitted to apply the proposed amendments by using either of the following two approaches:

Modified prospective approach — As stated in the proposed ASU, an entity that elects to use the modified prospective approach “would apply the proposed amendments to payments made or promised after the adoption date and continue applying current GAAP to payments made or promised before the adoption date.” The entity would not (1) restate prior-period results, (2) record a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the balance sheet) for any period presented, or (3) adjust the comparative periods presented.
Modified retrospective approach — The proposed ASU states that an entity that elects to use the modified prospective approach “would apply the proposed amendments to payments made or promised after the beginning of the earliest period presented in the financial statements that include the adoption of the proposed amendments.” For each period presented, the entity would adjust the financial statements “to reflect the period-specific effects of applying the new guidance.” However, the entity would not record a cumulative-effect adjustment “to the opening balance of retained earnings (or other appropriate components of equity or net assets in the balance sheet) for the earliest period presented.”

Appendix — Questions for Respondents

The proposed ASU’s questions for respondents are reproduced below for reference.

Overall

Question 1: Do you agree with the guidance on consideration payable to a customer accounted for under Topic 606 in the amendments in this proposed Update? Are the proposed amendments clear and operable? If not, what changes would you suggest? Do you anticipate any auditing challenges? Please explain why or why not.

Question 2: The Board expects that the proposed amendments would primarily affect entities that make payments on behalf of a customer or to a customer of an entity’s customer that is outside the entity’s direct distribution chain, such as entities operating on a platform. Do you agree with the Board’s assessment of the arrangements and entities expected to be affected by the proposed amendments? If not, what other arrangements or entities may be significantly affected or would not be affected but should be considered? Please explain.

Question 3: The Board expects that the proposed amendments may result in a reclassification of amounts between expense and revenue. Do you expect that the proposed amendments could have other effects, such as changes to the timing or measurement of revenue or expense? Please explain why or why not and describe any other potential effects.

Negative Revenue

Question 4: Negative revenue can arise when consideration payable to a customer reduces revenue in an amount that exceeds consideration received from the customer (see paragraph BC20 for additional background information). Would the proposed amendments increase the prevalence of negative revenue? If so, how pervasive and material would negative revenue be in practice, and should the Board consider standard-setting efforts to address negative revenue? Please explain why or why not. If the Board were to pursue standard setting on negative revenue:

Should negative revenue be presented as expense in some or all circumstances? If so, should expense presentation be required or optional?
What unit of account should be used to assess negative revenue — for example, the contract level or the customer level?
If negative revenue is assessed on a cumulative basis, how should the cumulative amount be determined — for example, from inception of the customer relationship or on a year-to-date basis?
Would disclosures about negative revenue be decision useful? If so, what information should be disclosed? Would the expected benefits of such a disclosure justify its expected costs?

Transition and Effective Date

Question 5: The proposed transition requirements would allow entities to apply the proposed amendments on a modified prospective basis to payments made or promised after the adoption date or on a modified retrospective basis to payments made or promised after the beginning of the earliest period presented in the financial statements that include the adoption of the proposed amendments.

Are the proposed transition requirements clear and operable? Please explain why or why not. If not, what transition method would be more appropriate and why?
The proposed transition requirements would apply to payments that are made or promised, rather than to contracts. Do you agree with using payments made or promised for applying the proposed amendments under the transition methods? Is this approach clear and operable? Please explain why or why not. If not, what alternative approach should the Board consider and why?
Which transition method do you anticipate entities electing to apply the proposed amendments? Is it necessary and/or beneficial to provide an option for a modified prospective application? Please explain why or why not.
For investors, would one of the transition approaches provide more decision-useful information than the other? Would the transition disclosures be decision useful? Please explain why or why not.

Question 6: How much time would be needed to implement the proposed amendments? Should the effective date for entities other than public business entities be different from the effective date for public business entities? Please explain why or why not. If so, how much additional time would you recommend for entities other than public business entities?

Question 7: Early adoption of the proposed amendments would be permitted. Do you agree that early adoption should be permitted? Do you agree that an entity that adopts the proposed amendments in an interim period should be required to adopt them as of the beginning of the annual reporting period that includes that interim reporting period? Please explain why or why not.

Benefits and Costs

Question 8: Would the expected benefits of the proposed amendments justify the expected costs? If not, please describe the nature and magnitude of those costs, differentiating between one-time costs and recurring costs.

Contacts

	Chris Chiriatti Audit & Assurance Managing Director Deloitte & Touche LLP +1 203 761 3039 cchiriatti@deloitte.com		Kristin Bauer Audit & Assurance Partner Deloitte & Touche LLP +1 312 486 3877 kbauer@deloitte.com
	Joe Catsavas Audit & Assurance Senior Manager Deloitte & Touche LLP +1 415 783 5627 jcatsavas@deloitte.com

Footnotes

FASB Proposed Accounting Standards Update (ASU), Revenue From Contracts With Customers (Topic 606): Consideration Payable to a Customer.

FASB Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers.

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