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The IASB and FASB have decided to develop a fully converged revenue standard based on a single set of prinicples for recognition and measurement that would be applied to all types of revenue-generating activities. The IASB discussion paper focuses on revenue recognition in the context of contracts with customers only.
EFRAG welcomes work being carried out on this subject because we believe that revenue recognition is the cause of many practical problems and that it will help all the IASB's constituents if the existing material on the subject could be enhanced.
However, EFRAG has a fundamentally different view as to when revenue should be recognised to the one proposed in the paper. The DP proposes that revenue should be recognised only when a performance obligation is satisfied. We think it is unfortunate that the DP does not explain why the IASB regards revenue as an important figure because, had it done so, we might have had a better understanding of what it is that the IASB thinks revenue should represent and why it thinks that. EFRAG believes the financial statements would be most decision-useful were revenue a measure of activity carried out to fulfil a contract with a customer; in other words, if revenue was recognised as the entity progresses towards performance obligation fulfilment, rather than just on fulfilment.
Putting that fundamental concern aside and focusing on the model proposed, EFRAG agrees with much of what the DP proposes. You can download EFRAG's draft comment letter below. |
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