The Board discussed a draft chapter on measurement for its forthcoming discussion paper on revenue recognition. The chapter considers the fundamental issues involved in measuring a contract with a customer, including:
- how the performance obligations in a contract should be measured at contract inception;
- whether those measurements should be updated after contract inception for changes other than those that result from the entity�s performance (ie remeasured), or whether they should be �locked in�.
The draft chapter develops two measurement approaches. In the customer consideration approach, the performance obligations are initially measured by allocating a proportion of the contract price to each individual obligation. Subsequently a performance obligation is remeasured only if it is deemed onerous. In the current exit price approach, performance obligations are measured at exit price both initially and subsequently.
The draft chapter was in the observer notes for the meeting, available on the Website.The Board tentatively decided that the discussion paper should express a preliminary view in favour of the customer consideration approach. It was also decided that in at least some cases performance obligations would need to be remeasured other than when deemed onerous. The cases in which such remeasurement would be required will be discussed at a future meeting. The Board discussed briefly whether a contract asset could be recognised at inception in some cases and will discuss this further at a future meeting.