Tentative Board Decisions
Tentative Board decisions are provided for those interested in
following the Board's deliberations. All of the reported decisions are
tentative and may be changed at future Board meetings.
December 16, 2015 Joint FASB/IASB Videoconference Board Meeting
Revenue recognition—principal versus agent (reporting revenue gross versus net).
The FASB and the IASB (the Boards) met to redeliberate amendments
proposed to the principal versus agent guidance, in light of the
feedback received on their respective Exposure Drafts: FASB Proposed
Accounting Standards Update, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and IASB Exposure Draft, Clarifications to IFRS 15. The Boards had proposed the same amendments.
The Boards affirmed the proposed amendments to clarify the principal
versus agent guidance in Topic 606 and IFRS 15. The Boards' decisions
Principal versus Agent Considerations
Principle for Determining Whether an Entity Is a Principal or an Agent
The Boards affirmed the principle in Topic 606 and IFRS 15 that an
entity's promise is to provide a specified good or service to a customer
(that is, the entity is a principal) when it controls the specified
good or service before that good or service is transferred to the
customer. In contrast, the entity's promise is to arrange for another
party to provide that good or service (that is, the entity is an agent)
when it does not control the specified good or service before it is
transferred to the customer.
Unit of Account for the Principal versus Agent Evaluation
The Boards affirmed the proposals to clarify all of the following:
Application of the Control Principle
- That an entity determines whether it is a principal or an agent for each specified good or service promised to the customer.
- A specified good or service is a distinct good or service (or
distinct bundle of goods or services) to be provided to the customer.
- Depending on the circumstances, a specified good or service may
be a right to an underlying good or service to be provided by another
The Boards affirmed the proposals to clarify the application of the control principle in the context of services.
The Boards affirmed the proposals to clarify the role of the indicators
in paragraph 606-10-55-39 of Topic 606 and paragraph B37 of IFRS 15. In
particular, those amendments will:
The Boards also decided to eliminate exposure to credit risk as an
indicator (paragraph 606-10-55-39(e) of Topic 606 and paragraph B37(e)
of IFRS 15) as to whether an entity controls a specified good or service
before it is transferred to the customer.
- Clarify that the indicators assist in the evaluation of control, rather than override or replace the control evaluation
- Reframe the indicators to indicate when an entity is a principal, rather than when an entity is an agent
- Clarify how each indicator relates to the control principle
- Clarify that one or more indicators may be more or less relevant to the control evaluation in different contracts.
The FASB directed its staff to draft a final Accounting Standards Update for vote by written ballot.