SUMMARY OF BOARD DECISIONS
Summary of Board decisions are provided for the information and
convenience of constituents who want to follow the Board´s deliberations. All of
the conclusions reported are tentative and may be changed at future Board
meetings. Decisions are included in an Exposure Draft for formal comment only
after a formal written ballot. Decisions in an Exposure Draft may be (and often
are) changed in redeliberations based on information provided to the Board in
comment letters, at public roundtable discussions, and through other
communication channels. Decisions become final only after a formal written
ballot to issue an Accounting Standards Update.
September 27, 2012 Joint FASB/IASB Videoconference Board
recognition. The IASB and the FASB discussed the following topics
as they continued their redeliberations on the revised Exposure Draft,
Revenue from Contracts with Customers (the 2011 ED):
Cumulative Amount of Revenue Recognized
- Constraining the cumulative amount of revenue recognized
- Collectibility, including accounting for contracts with customers that
contain nonrecourse, seller-based financing
- Time value of money
- Contract issues—distribution networks.
The Boards tentatively
decided that, consistent with the proposal in the 2011 ED, an entity should
evaluate whether to constrain the cumulative amount of revenue recognized if the
amount of consideration to which an entity expects to be entitled is variable.
Paragraph 53 of the 2011 ED identified examples of variable consideration. The
Boards tentatively decided to clarify the meaning of variable
consideration to indicate that the constraint should apply to a fixed price
contract in which there is uncertainty about whether the entity would be
entitled to that consideration after satisfying the related performance
Additionally, the Boards discussed the application of the
constraint in the revenue proposals and asked the staff to perform further
analysis and bring the topic back to a future meeting.
The Boards discussed whether:
Following that discussion, the Boards requested the staff to
analyze further those other approaches for accounting for customer credit risk
and to discuss that analysis at a future meeting.
- To affirm their proposals in the 2011 ED that if a contract with a
customer does not include a significant financing component, the consideration
promised by the customer should not be adjusted for the customer´s credit risk
and that any impairment loss arising from that contract should be presented as
a separate line item adjacent to the revenue line item; or
- To consider other approaches for accounting for a customer´s credit risk,
- Modifying the 2011 ED proposals to require that all impairment losses
arising from contracts with customers (regardless of whether the contract
has a significant financing component) be presented adjacent to the revenue
line item; or
- Introducing a revenue recognition threshold for collectibility.
Boards tentatively decided:
Time Value of
- To present any impairments recognized in the current period or in a
subsequent period in a consistent manner; and
- To provide additional guidance in the standard on determining whether a
contract with a customer exists based on the customer´s commitment to perform
its obligations under the contract.
The Boards tentatively affirmed the proposal in the 2011 ED
that an entity should adjust the amount of promised consideration for the
effects of the time value of money if the contract with a customer has a
significant financing component.
The Boards also tentatively decided:
- To clarify the application of the indicators in paragraph 59 of the 2011
ED for determining whether a contract has a significant financing component;
- To clarify that if the transfer of goods or services to a customer is at
the discretion of the customer, an entity should not adjust advance payments
for the effects of the time value of money;
- To retain the proposed practical expedient and clarify that the practical
expedient should also apply to contracts with a duration of greater than one
year if the period between performance and payment for that performance is one
year or less; and
- To clarify that the proposed revenue standard would not preclude an entity
from presenting as revenue interest income that is recognized from contracts
with a significant financing component.
The Boards discussed the application of
the proposals in the 2011 ED to arrangements that arise in distribution
networks. In those arrangements, an entity (such as a manufacturer) may transfer
control of a product to its customer (who may be an intermediary, such as a
dealer or retailer). The manufacturer may also promise other goods or services
as sales incentives to encourage the sales of those products that have become
part of the intermediary´s inventory.
If the promise to transfer those
goods or services that are regarded as sales incentives was made in the contract
or implied in the circumstances described in paragraph 24 of the 2011 ED, the
Board affirmed that those promised goods or services should be accounted for as
a performance obligation. However, if the promise was made after the transfer of
control of the product to the intermediary, the Boards affirmed that the promise
would not be a performance obligation.