MyCIMA

Revised revenue recognition guidance

Posted: Monday 21 November 2011 by Nick Topazio
Replies : 1
The core principle of this revised proposed standard is that an entity would recognise revenue from contracts with customers when it transfers promised goods or services to the customer. The amount of revenue recognised would be the amount of consideration promised by the customer in exchange for the transferred goods or services. However, in response to feedback received from nearly 1000 comment letters on the 2010 exposure draft and extensive outreach activities, the IASB and the FASB further refined their original proposals.

In particular they:

  • added guidance on how to determine when a good or service is transferred over time;
  • simplified the proposals on warranties;
  • simplified how an entity would determine a transaction price (including collectibility, time value of money, and variable consideration);
  • modified the scope of the onerous test to apply to long-term services only;
  • added a practical expedient that permits an entity to recognise as an expense costs of obtaining a contract (if one year or less); and
  • provided exemption from some disclosures for non-public entities that apply US GAAP.

The consultation paper, which can be accessed via the IASB website here, is open for comment intil 13 March 2012.

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CIMA to IASB Revenue Recognition Final.pdf109.5 KB

CIMA's Response to Revenue Recognition consultation

Posted by Nick Topazio on Wednesday 04 April 2012 12:24

CIMA's response to this consultation was generally supportive; overall we feel that this exposure draft is much better than the previous version and contains good illustrative examples.

We are still concerned with the interaction of the ‘change of control' and ‘satisfaction of performance obligations' concepts especially in relation to long-term construction contracts and the ‘alternative use' restriction.  We believe that the IASB should include further illustrative examples of revenue recognition for a range of long-term contracts, for example those that are satisfied largely from common manufactured elements or where the asset only becomes specific to a customer part way through the production cycle.

We do not agree that the onerous performance obligation test should only be applied to contracts of more than one year; we would prefer that the test is applied to contracts that span a financial reporting period-end and which would materially affect the results for the period.

CIMA's full response which includes responses to each of the specific questions in the exposure draft is attached to the original post above.