The US Financial Accounting Standards Board (FASB) has issued a proposed accounting standards update (ASU) designed to improve the guidance on the new joint IFRS standard on revenue recognition covering collectibility, noncash consideration and completed contracts at transition targeted at US company reporters
Additionally, the amendments in the proposed ASU would provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers.
The consultation document from FASB states: ‘The proposed amendments would provide clarifying guidance in a few narrow areas and add some practical expedients to the guidance. Those proposed amendments should reduce the degree of judgment necessary to comply with Topic 606 (IFRS 15), which the FASB expects will reduce the risk of diversity arising in practice and reduce the cost and complexity of applying the guidance.’
The amendments in this proposed update would not change the core principle of the FASB guidance on IFRS 15, Revenue from Contracts with Customers, is available for review until 16 November 2015.
This is a converged standard developed by the International Accounting Standards Board (IASB) and FASB, which is set to come into effect for accounting periods from 1 January 2017 for public business entities.
The FASB proposals are applicable for US reporters only and are not the same as changes proposed by the IASB this July.
The consultation states that FASB does not expect that the amendments in this proposed Update would result in financial reporting outcomes that are ‘significantly different from those reported under IFRS for similar transactions’.
In the latest CFOdirect Network briefing from PwC, partner Brett Cohen said: ‘The proposed amendments, along with the amendments proposed in May and August, are intended to reduce the risk of diversity in practice and reduce the cost and complexity of applying certain aspects of the revenue standard.
‘While the amendments are not intended to change the core principles of the new revenue standard, they will impact application of the guidance in the areas discussed above. Additionally, some of the changes included in the FASB’s proposal differ from the IASB’s proposed amendments, which were issued 30 July.
The consultation on the proposed Accounting Standards Update, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, is open for feedback until 16 November 2015.
The proposed ASU is available for review here
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