The IASB and the FASB completed their planned redeliberations of the exposure draft Revenue from Contracts with Customers by discussing the following topics:
- The effect of the proposed standard on telecommunications (and other) companies
- The transition requirements for the proposed standard
- Whether it is necessary to re-expose the proposed standard.
Effect of the proposed standard on telecommunications (and other) companies
The boards discussed concerns raised by constituents in the telecommunications industry about the effect of the boards' proposed standard. The boards tentatively decided to not revise the requirements of the proposed standard. This decision was supported by ten members of the IASB and five members of the FASB.
The boards tentatively affirmed their decision in the exposure draft that an entity should apply the proposed standard on a retrospective basis. However, to ease the burden of applying the proposed standard in the first year of application, the boards tentatively decided that:
- An entity should not be required to restate contracts that begin and end within the same reporting period.
- An entity should be permitted to use hindsight in estimating variable consideration in the comparative reporting periods.
- An entity should be required to perform the onerous test only at the effective date unless an onerous contract liability was recognised previously in a comparative period.
- An entity should not be required to disclose the maturity analyses of remaining performance for prior periods.
An entity should apply any relief employed consistently to all transactions throughout the comparative periods.
The decision to propose retrospective application was supported by all members of the IASB and the FASB. The decision to provide entities with the transitional reliefs outlined above was supported by twelve members of the IASB and four members of the FASB.
The boards also tentatively decided that if an entity employs any of the available reliefs above, the entity should disclose the following information
- The reliefs that have been employed by the entity
- To the extent possible, a qualitative assessment of the likely effect of applying those reliefs.
Those disclosures were supported by eight members of the IASB and five members of the FASB.
Re-exposure of the proposed standard
The boards agreed to re-expose their revised proposals for a common revenue recognition standard.
Re-exposing the revised proposals will provide interested parties with an opportunity to comment on revisions that the boards have undertaken since the publication of an exposure draft on revenue recognition in June 2010. Specifically, the boards plan to invite feedback on:
- the extent to which the revised requirements are understandable and whether the drafting of the requirements has not created unintended consequences for specific contracts or industries; and
- a few specific aspects of the revised requirements.
It was the unanimous view of the boards that while there was no formal due process requirement to re-expose the proposals it was appropriate to go beyond established due process given the importance of the revenue number to all companies and the need to take all possible steps to avoid unintended consequences. The boards intend to re-expose their work in the third quarter of 2011 for a comment period of 120 days.
The boards directed the staff to draft an exposure draft for vote by written ballot. No board members indicated that they intend to dissent to the publication of the exposure draft.