The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) today (24 June 2010) published for public comment a draft standard to improve and align the financial reporting of revenue from contracts with customers and related costs.
If adopted, the proposal would create a single revenue recognition standard for International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP) that would be applied across various industries and capital markets. The publication of this joint proposal represents a significant step forward toward global convergence in one of the most important and pervasive areas in financial reporting. The proposed standard would replace IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. In US GAAP, it would supersede most of the guidance on revenue recognition in Topic 605 of the FASB Accounting Standards Codification.
The core principle of the draft standard is that an entity should recognise revenue from contracts with customers when it transfers goods or services to the customer in the amount of consideration the entity receives, or expects to receive, from the customer. The proposed standard would improve both IFRSs and US GAAP by:
- removing inconsistencies in existing requirements;
- providing a more robust framework for addressing revenue recognition issues;
- improving comparability across companies, industries and capital markets;
- requiring enhanced disclosure; and
- clarifying the accounting for contract costs.
The exposure draft Revenue from Contracts with Customers is open for comment until 22 October 2010 and can be accessed via the ‘Comment on a Proposal’ section of www.iasb.org or on www.fasb.org. A live webcast introducing the proposals is planned for early July - details will be available on the FASB and IASB websites soon. An IASB ‘Snapshot’ and an ‘FASB In Focus’, high level summaries of the proposals, will be available in due course to download free of charge from the IASB and FASB websites: http://go.iasb.org/revenue+recognition and http://www.fasb.org.
Source : www.iasb.org