The main objectives of this project are as follows:
- To remove inconsistencies and weaknesses in existing revenue recognition standards by providing clear principles for revenue recognition in a robust framework
- To provide a single revenue recognition model which will improve comparability over a range of industries, companies and geographical boundaries
- To simplify the preparation of financial statements by reducing the number of requirements to which preparers must refer.
US GAAP consists of broad revenue recognition concepts around which numerous industry- and transaction- specific requirements have evolved to deal with individual types of contracts. IFRSs contain fewer standards, but the two main standards can be difficult to apply to complex transaction.
The boards undertook this project to provide clear principles on when revenue should be recognised and how much revenue should be recognised.
The key principles on which the proposed model is based – revenue is recognised on transfer to the customer, measured at transaction price- are consistent with much of current practice. The boards believe the proposed standard will improve financial reporting by:
- providing a more robust framework for addressing issues as they arise
- increasing comparability across industries and capital markets
- providing enhanced disclosures
- clarifying accounting for contract costs
Summary of outreach activity to date
The Board and staff have conducted extensive outreach on the ED Revenue from Contracts with Customers published in June 2010, holding more than 200 meetings or events on six continents, including over 30 conferences and discussion forums.
Round-table discussions were held in London, Kuala Lumpur and the US, and conferences, working sessions, discussion forums and one-to-one discussions have also been held across all major geographical regions. Targeted outreach, to refine and develop the proposals, has involved representatives from accounting firms, local standard-setters, regulators, preparers and affected sectors (such as real estate, construction, defence/aerospace, telecommunications, software/IT, media and pharma/chemicals)
In addition to face-to-face interaction, technology such as webcasts (6 have been broadcast so far), video conferencing, podcasts, email alerts and the website have been used to engage with and inform interested parties.
Click here for an update on outreach activities.