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IASB meeting summaries and observer notes

IASB meeting summaries and observer notes


 IASB January 2013


 

The IASB held an education session on 29 January 2013. No decisions were taken.


The IASB and the FASB met on 30 January 2013 to continue their joint redeliberations on the revised Exposure Draft Revenue from Contracts with Customers (the 2011 ED).

The boards discussed the following topics:

a. Scope
b. Repurchase agreements
c. Effect of the revenue recognition model on asset managers
d. Transfers of assets that are not an output of an entity’s ordinary activities
e. Update on outreach regarding disclosure and transition proposals.

Paper 7A—Scope

The boards tentatively decided to confirm the scope of the 2011 ED, including the definition of a customer.

The boards also tentatively decided to clarify:

a. that a collaborative arrangement (as described in paragraph 10 of the 2011 ED) is not limited to the development and commercialisation of a product;
b. that a contract with a collaborator or a partner is within scope of the final Revenue Standard if the counterparty meets the definition of a customer; and
c. the application of paragraph 11 of the 2011 ED that specifies how an entity would apply the final Revenue Standard when a contract with a customer is partially within the scope of the final Revenue Standard and partially within the scope of other Standards.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


Paper 7B Repurchase agreements


The boards discussed the following topics related to the implementation guidance on repurchase agreements in paragraphs IG38–IG48/B38-B48 of the 2011 ED:

a. sale-leaseback transactions that include a put option;
b. other amendments;
c. application questions; and
d. call options—significant economic incentive not to exercise.

Sale-leaseback transactions that include a put option

The boards tentatively decided that a sale-leaseback transaction that includes a put option, with a repurchase price that is less than the original sales price and for which the customer has a significant economic incentive to exercise, would be accounted for as a financing.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


Other amendments

The boards tentatively decided to remove the word ‘unconditional’ from the implementation guidance for repurchase agreements.

The boards clarified that in a product financing arrangement (ie when an entity sells a product to another entity and repurchases that product as part of a larger component for a higher price), an entity would exclude the processing costs from the repurchase price in determining the amount of interest.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


Application guidance

The boards considered the application of the implementation guidance on repurchase agreements in the 2011 ED to the following scenarios and tentatively decided that no amendments to the guidance were necessary.

a. Sale of a good to a customer with a guarantee that the customer will receive a minimum amount upon resale—the boards confirmed that the existence of the guarantee would not preclude the transfer of control of the product to the customer.

Thirteen IASB members and all FASB members agreed. One IASB member abstained.

b. Sale of a good to a customer that is subsequently repurchased for the purposes of leasing to the customers customer—the boards confirmed that the repurchase of the good by the entity subsequent to the customer obtaining control of that good does not constitute a repurchase agreement as described in IG38/B38. However, in determining whether the customer obtained control of the good, an entity should consider the principal versus agent considerations in IG16 IG19/B16-B19.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.

Call options—significant economic incentive not to exercise

The boards tentatively decided not to amend the 2011 ED to require an entity to consider whether it has a significant economic incentive not to exercise a call option when applying the implementation guidance for repurchase agreements.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


Paper 7C—Effect of the revenue recognition model on asset managers


The boards discussed the application of the 2011 ED to the asset management industry. Specifically, the application of the:

a. constraint on revenue recognised; and
b. contract cost proposals.

Constraint on revenue recognised

The boards tentatively confirmed their proposal in the 2011 ED that an asset manager’s performance based incentive fees should be subject to the constraint on revenue recognised (as amended in the November 2012 joint board meeting).

Fourteen IASB members and five FASB members agreed. One IASB member abstained.


Contract cost proposals

The boards tentatively decided that no changes should be made to the contract cost proposals in the 2011 ED for upfront commission costs incurred in some asset management arrangements.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


The FASB also tentatively decided to retain the cost guidance for financial services investment companies in paragraph 946 605-25-8.

Six FASB members agreed.


Paper 7D Transfers of assets that are not an output of an entity’s ordinary activities

The boards tentatively decided to confirm the consequential amendments proposed in the 2011 ED for transfers of non financial assets that are not an output of an entity’s ordinary activities. Those amendments require an entity to apply the control and measurement requirements (including the constraint on revenue recognised) from the revenue model for the purposes of determining when the asset should be derecognised and the amount of consideration to be included in the gain or loss recognised on transfer.

Eleven IASB members and all FASB members agreed. One IASB member abstained.


The boards also tentatively decided that the requirements in paragraphs 13-15 of the 2011 ED for determining whether a contract exists should also apply to transfers of non-financial assets that are not an output of an entity’s ordinary activities.

Fourteen IASB members and all FASB members agreed. One IASB member abstained.


Paper 7E Update on outreach regarding disclosure and transition proposals

The staff provided the boards with a summary of the feedback received on the boards’ proposed disclosure and transition requirements in the 2011 ED. This feedback was received through comment letters, outreach and workshops held in Japan, the UK and the US that included both preparers and users of financial statements. No decisions were taken. The issues will be discussed by the boards in February 2013.


Next steps

The boards will continue redeliberations on the 2011 ED in February 2013.

 

Date: 1/29/2013