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Revenue is one of the most important financial statement measures to both preparers and users of financial statements. It is used to measure and assess aspects of a reporting entity's past financial performance, future prospects, and financial health. Revenue recognition is therefore one of the accounting topics most scrutinized by investors and regulators. Despite its significance and the increasing globalization of the world's financial markets, revenue recognition requirements prior to issuance of new guidance in 2014 differed in US generally accepted accounting principles (“US GAAP”) from those in International Financial Reporting Standards (“IFRS”), at times resulting in different accounting for similar transactions.
The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, the “boards”) jointly developed a standard containing comprehensive principles for recognizing revenue. As a result, the FASB issued ASC 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs—Contracts with Customers (collectively, the “revenue standard”), and the IASB issued IFRS 15, Revenue from Contracts with Customers, in May 2014 along with consequential amendments to existing standards. With the exception of a few discrete areas, the revenue standards are converged, eliminating most previous differences between US GAAP and IFRS in accounting for revenue from contracts with customers.
The boards subsequently issued multiple amendments to the new revenue standards as a result of feedback from stakeholders, primarily related to:
  • Deferral of the effective date of the revenue standard
  • Collectibility (see RR 2.6.1.5)
  • Identification of performance obligations (see RR 3.3)
  • Noncash consideration (see RR 4.5)
  • Licenses of intellectual property (see RR 9)
  • Principal versus agent guidance (see RR 10)
  • Practical expedients at transition
The amendments made by the FASB and IASB are not identical. For certain of the amendments, the financial reporting outcomes will be similar despite the use of different wording in ASC 606 and IFRS 15. However, there may be instances where differences in the guidance result in different conclusions under US GAAP and IFRS. Refer to SD 3.1 through SD 3.11 for further discussion of similarities and differences between the US GAAP and IFRS revenue standards.

1.1.1 Revenue recognition transition resource group

In connection with the issuance of the revenue standards, the boards established a joint working group, the Revenue Recognition Transition Resource Group (TRG), to seek feedback on potential implementation issues. The TRG met through 2016 and did not issue authoritative guidance but assisted the boards in determining whether they needed to take additional action, which could include amending the guidance. The TRG comprised financial statement preparers from a wide spectrum of industries, auditors, users from various geographical locations, and public and private organizations. Replays and minutes of the TRG meetings are available on the TRG pages of the FASB’s website.
Discussions of the TRG are nonauthoritative, but management should consider those discussions as they may provide helpful insight into that way the guidance might be applied in similar facts and circumstances. The SEC staff, for example, has indicated that it would use the TRG discussion as a basis to assess the appropriateness of SEC registrants’ revenue recognition policies.
Figure RR 1-1 lists the issues discussed by the TRG with the reference to the related TRG paper. The minutes of those discussions are recorded in separate TRG papers, the reference to which is also included in the table.
Figure RR 1-1
Issues discussed by the TRG
Date discussed
TRG paper reference
TRG minutes paper reference
Topic discussed
Revenue guide reference
July 18, 2014
1
Gross versus net revenue
July 18, 2014
Gross versus net revenue: amounts billed to customers
July 18, 2014
Sales-based and usage-based royalties in contracts with licenses and goods or services other than licenses
July 18, 2014
Impairment testing of capitalized contract costs
October 31, 2014
Customer options for additional goods and services and nonrefundable upfront fees
October 31, 2014
Presentation of a contract as a contract asset or a contract liability
FSP 33.3
October 31, 2014
Determining the nature of a license of intellectual property
October 31, 2014
Distinct in the context of the contract
RR 3.4
October 31, 2014
Contract enforceability and termination clauses
January 26, 2015
Identifying promised goods or services
January 26, 2015
Collectibility
January 26, 2015
Variable consideration
January 26, 2015
Noncash consideration
January 26, 2015
Stand-ready obligations
January 26, 2015
Islamic finance transactions
January 26, 2015
Costs to obtain a contract
January 26, 2015
Contract modifications
March 30, 2015
Contributions
March 30, 2015
Series of distinct goods or services
March 30, 2015
Consideration payable to a customer
March 30, 2015
Warranties
March 30, 2015
Significant financing component
March 30, 2015
Variable discounts
March 30, 2015
Exercise of a material right
March 30, 2015
Partially satisfied performance obligations
July 13, 2015
Accounting for restocking fees and related costs
July 13, 2015
Credit cards
July 13, 2015
Consideration payable to a customer
July 13, 2015
Portfolio practical expedient and application of variable consideration
July 13, 2015
Application of the series provision and allocation of variable consideration
July 13, 2015
Practical expedient for measuring progress toward complete satisfaction of a performance obligation
July 13, 2015
Measuring progress when multiple goods or services are included in a single performance obligation
July 13, 2015
Completed contracts at transition
July 13, 2015
Determining when control of a commodity transfers
November 9, 2015
Licenses – Specific application issues about restrictions and renewals
November 9, 2015
Pre-production activities
November 9, 2015
Whether fixed odds wagering contracts are included or excided from the scope of Topic 606
November 9, 2015
Customer options for additional goods and services
April 18, 2016
(US only)
Scoping considerations for incentive-based capital allocations
N/A
April 18, 2016
(US only)
Contract asset treatment in contract modifications
April 18, 2016
(US only)
Scoping considerations for financial institutions
April 18, 2016
(US only)
Evaluating how control transfers over time
April 18, 2016
(US only)
Class of customer
November 7, 2016
(US only)
Over time revenue recognition
November 7, 2016
(US only)
Capitalization and amortization of incremental costs of obtaining a contract
November 7, 2016
(US only)
Sales-based or usage-based royalty with minimum guarantee
November 7, 2016
(US only)
Payments to customers

*Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

2Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

3Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

4Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

5Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

6Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

7Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

8Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

9Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

10Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

11Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

12Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

13Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

14Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

15Amendments to one or both standards were as a result of these discussions. Refer to referenced chapters for further discussion.

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