OUR THOUGHTS ON:

FASB/IASB Meeting Talks Revenue Recognition

IFRS

By Lauren Rodgers

Whether a corporation is foreign or domestic, they all have one thing in common: revenue and proper recognition of that revenue. Revenue recognition was one of the primary discussion points at a recently held joint meeting the Financial Accounting Standards Board and International Accounting Standards Board (collectively referred to as the Boards).

On July 24, 2013, the Boards met to discuss a variety of topics, one of which related to the drafting of the final Standard Revenue from Contracts with Customers. As part of this meeting, members of the Boards deliberated collectability concerns from customers with credit risk and considerations in determining whether a contract is collectible.

Discussions were centered around implementing clarified guidance on how to account for revenue where collection is uncertain. During these deliberations, the Boards discussed how doubts about collectability should be accounted for as a discount or as an impairment loss. In making this determination, entities should make an overall qualitative assessment of all facts and circumstances surrounding the customer contract in order to determine whether all parties are committed to their obligations and whether components of the contract are subject to change.

Members of both Boards tentatively agreed to clarify the determination. This, along with other decisions relative to revenue recognition, will be incorporated into the draft of the final revenue Standard sometime in the near future.

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