The Board deliberated revenue recognition jointly with the FASB.
The boards tentatively approved a revised set of disclosure requirements for the forthcoming exposure draft, including requirements for an entity:
- to disaggregate the amount of revenue recognised, to make clear how that disaggregation relates to amounts presented or disclosed in accordance with other standards;
- to disclose the amount and expected timing of the satisfaction of its remaining performance obligations in contracts with an original duration of more than one year.
The revised disclosure proposal can be found in the observer notes for the meeting.
The boards tentatively decided that:
- an entity should recognise the following costs as expenses when incurred:
a) the costs of obtaining a contract (eg selling, advertising and marketing costs);
(b) costs that relate to satisfied performance obligations in the contract (ie costs relating to goods and services already transferred); and
(c) abnormal amounts of wasted labour, material or other fulfilment costs.
- if the costs incurred in fulfilling a contract do not give rise to an asset eligible for recognition in accordance with other standards (eg inventory; property, plant or equipment; software), an entity should recognise an asset if the costs:
(a) generate or enhance a resource that the entity will use to satisfy performance obligations in a contract;
(b) relate directly to a contract (or anticipated contract); and
(c) are probable of recovery under a contract
- an entity should amortise the asset as the goods or services to which the asset relates are transferred to the customer.
- an entity should test the asset for impairment by comparing its carrying amount to the amount recoverable under the contract (ie the amount of consideration allocated to remaining performance obligations less the direct costs of satisfying those performance obligations).
The IASB tentatively decided to withdraw from IAS 2 Inventory the guidance on inventories of a service provider.
The boards considered how an entity should account for a contract that includes some components that are within the scope of the revenue standard but that also includes other components that are within the scope of other standards.
The boards tentatively decided that if other standards specify how to separate or measure components of a contract, an entity should apply those requirements. Otherwise, the entity should apply the principles of the revenue standard.
The boards plan to publish the exposure draft in the second quarter of 2010. They do not plan to discuss any further issues, except any issues arising from (a) consideration of consequential amendments and (b) their review of the draft exposure draft.