Revenue Recognition Exposure Draft - 'Take Two'


The comment period for the November 2011 exposure draft (ED), Revenue from contracts with customers, ended in March 2012. Andrea Allocco, from PwC's Accounting Consulting Services Central Team, looks at the responses.


Preparers, users and auditors have again provided feedback to the IASB and FASB (the boards) on their project, Revenue from contracts with customers, this time on the second ED. The volume of letters dropped significantly from those received on the 2010 ED. This could reflect the boards' success in responding to many of the matters raised on the first ED.

The boards requested feedback on six areas, as well as general input about whether the proposed guidance was clear and operational. Many respondents did not restrict their comments to the six areas; as a result, some additional matters were identified that might warrant attention. Most respondents continue to support the boards' efforts, but a number of concerns remain, including the accounting for onerous performance obligations, the extent of disclosures and transition.

The majority vote

The responses to some of the questions and other topics that attracted comment are explained in table below.

Some industries have collaborated in crafting comment letters and providing other feedback to the boards. We will look in more detail at those industry views in our practical guide due to be released in the next month.

What's next?

The boards are expected to begin redeliberations in June, and the final standard is expected in late 2012 or early 2013. The effective date will be no earlier than 2015 but is likely be 2016 or beyond, given the timetable and practical challenges of implementation.

Management should consider evaluating the effect of the proposals, including any implications on processes and controls, at a high level sooner rather than later. There will continue to be opportunities to influence the redeliberations through the boards' consultation. Management needs to understand the effect of the standard on its accounting for contracts if it is to provide valuable feedback and influence the debate.

Summary of responses to significant issues

Common themes

Summary of observations

Performance obligations satisfied over time. The boards provided criteria to determine when a performance obligation is satisfied over time.

Respondents support the additional guidance but asked for clarity about how to apply the guidance in practice. Some also disagree with how "alternative...

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