Devel104-Revenue-Mar2015

Devel104-Revenue-Mar2015 - ey.com/IFRS Issue 104 March 2015...

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ey.com/IFRS Issue 104 / March 2015 IFRS Developments IASB and FASB decide to make more changes to their new revenue standards What you need to know The IASB and the FASB agreed to amend the transition requirements in their new revenue standards. The Boards reached different decisions on whether to amend the requirements for non-cash consideration, presentation of sales taxes and collectability. The Boards’ staffs provided updates on their research on how to address concerns about the application guidance on principal versus agent considerations. Any changes to the standards will be subject to the Boards’ due process procedures, including seeking public comment. Highlights The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) (collectively, the Boards) agreed to add practical expedients to their new revenue standards to make it easier for entities to account for contract modifications at transition. The IASB decided to add a practical expedient for completed contracts under the full retrospective transition approach. The Boards also reached different decisions on how to address questions that have arisen on the requirements for non-cash consideration, presentation of sales taxes and collectability. It is unclear whether the Boards’ tentative decisions on the amendments to the new revenue standards will lead to diversity in practice between IFRS and US GAAP preparers. The IASB plans to issue one exposure draft in June 2015 that incorporates its decisions from the February and March 2015 meetings and any additional amendments it determines necessary. The FASB plans to issue separate proposals for decisions made at each of the meetings. At the March 2015 meeting, the Boards’ staffs also discussed their research on possible changes to the application guidance on principal versus agent considerations. The Boards are expected to address this issue soon. The Boards agreed to add practical expedients for certain transition matters.
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2 IASB and FASB decide to make more changes to their new revenue standards Boards’ tentative decisions Transition – contract modifications and completed contracts The Boards agreed to add practical expedients to their new standards to alleviate the transition burden of accounting for contracts that were modified prior to adoption under both transition approaches (i.e., full and modified retrospective). This assessment could be onerous for entities that have multi-year contracts that have been modified many times. The Boards agreed to add a practical expedient such that an entity would not be required to evaluate the effects of each contract modification from contract inception through to the ‘contract modification adjustment date’ (CMAD), which the Boards defined differently. Instead, an entity would determine the contract’s transaction price at the CMAD (with the benefit of hindsight) and then perform a single allocation of the transaction price to all satisfied and unsatisfied performance obligations, based on their historical stand-alone selling prices. Any
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