Sigvard Heurlin, PwC.
IASB och FASB arbetar sedan några år med att ersätta gällande standarder för intäktsredovisning, IAS 11 och IAS 18, med en ny generell standard för redovisning av intäkter avseende kontrakt med kunder. Ett förslag till standard (Exposure draft) kom ut i juni 2010 och standarden beräknas bli publicerad i kvartal 2, 2011. Huvudprincipen i förslaget är att intäkt ska redovisas när vara eller tjänst överförts till kunden och kunden fått kontroll över varan eller tjänsten. Ca 1.000 kommentarer har lämnats till förslaget, de flesta från företag och organisationer i USA. Under detta avsnitt i symposiet ges en överblick över innehållet i den nya standarden. Vidare summeras den diskussion som IASB och FASB har haft om de mest kontroversiella punkterna i förslaget och vilka väsentliga förändringar som sker i förhållande till gällande standarder. Exempel på punkter som tas upp:
Vilka intäkter omfattas och när ska intäkt redovisas för vara resp. tjänst?
Hur redovisas intäkt när ett kontrakt omfattar flera uppdrag eller tjänster?
Hur definieras det centrala begreppet 'fullgörandeförpliktelse' (Satisfaction of a performance obligation) ?
Hur redovisas kostnader för att erhålla ett kontrakt? Vad gäller för produktgarantier?
Vad innebär standarden för successiv vinstavräkning?
www.financialreporting.se
2. Agenda
Why have the IASB and the FASB taken on this project?
What is the principal approach taken? And what has been achieved
during the last year?
Where do the IASB and the FASB stand now in this project?
What happens next?
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3. Why need for a new standard?
A critical project for both the IASB and the FASB
- For the IASB: Existing standards on revenue recognition, IAS 11
and IAS 18, are based on two different principles
- Insufficient guidance in some cases. E.g. multiple elements
arrangements. Reliance on US GAAP for specific guidance
- For the FASB: US GAAP has a wide range of very detailed industry
specific requirements (about 200), but no single standard
- A need for consistent principles for use across industries.
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4. What is the principal approach taken?
Employs an assets and liabilities approach - the cornerstone of the IASB
and the FASB Framework
Current revenue guidance in IFRS and US GAAP focuses on an
´earnings process´
However, difficulties often arise in determining when an entity earns
revenue.
The earnings process is therefore not referred to in the proposal.
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5. Where do the IASB and the FASB stand in the
project?
ED, Revenue from contracts with customers, published in June 2010
Nearly 1.000 comment letters received
Redeliberations of the proposal in the ED started in January 2011
A new ED to be published in Q3 with a 120-day comment period, will
probably be delayed until October
Goal: to issue a final standard in 2012.
The following slides present the revenue model that the
Boards have developed after recent decisions.
The decisions are tentative and subject to change.
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6. Significant feedback on the 2010 ED
Overall views:
• Support for a converged revenue recognition model
• However, a need for further clarification of the operations of the
proposed principles:
- the concept of control to service contracts and contracts for
continuous transfer of control,
- distinct goods or services for identifying separate performance
obligations,
- estimating the transaction price on a probability-weighted basis
and including credit risk and time value of money calc.,
- cost-benefit considerations.
• Re-expose for further public comments.
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7. The scope
Does not seem to imply any changes to the scope. Thus the proposed
scope would refer to all contracts with customers, except:
Lease contracts,
Insurance contracts,
Certain contractual rights and obligations within the scope of
other standards, including financial instruments.
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8. The basic model is unchanged from the 2010 ED
Thus the application of the revenue recognition model includes the
following steps:
1. Identify the contracts with the customer(s)
2. Identify the separate performance obligations
( ´prestationsförpliktelser´)
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognise revenue when a performance obligation is satisfied.
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9. Summary of the Revenue recognition model: Step
1: Identify the contract(s) with the customer
Proposal in the ED Revised model
Definition of a contract:
An agreement between two or No change.
more parties that creates No change to the criteria for the
enforceable rights and obligations existence of a contract (e.g. should
have commercial substance,
approval by the parties,
identification by the entity of the
enforcable rights and manner of
payment).
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10. Summary of the Revenue recognition model: Step
1: Identify the contract(s) with the customer
Proposal in the ED Revised model
Combining contracts:
Account for contracts together if Combine contracts with the same
the contract prices are customer if entered into at or near
interdependant. the same time.
Indicators to be applied. Criteria to be applied:
• Negotiated as a package
• Consideration in one contract
depends on the the other
contract
• Interrelated in terms of design,
technology or function.
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11. Summary of the Revenue recognition model. Step
1: Identify the contrac(s)
Proposal in the ED Revised model
Segmenting a contract:
Account for a single contract as (This step is eliminated. However,
two or more if goods or services price independence used when
are priced independently. allocating the transaction price.)
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12. Summary of the Revenue recognition model. Step
2: Identify the separate performance obligations
Proposal in the ED Revised model
Definition of a performance
obligation:
An enforceable promise No material change. Includes
(´tvingande löfte´) to transfer a promises that are implied by:
good or service.
• business practices
• published policies
• specific statements if
valid expectations (´välgrundade
förväntningar´) to perform are
created.
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13. Summary of the Revenue recognition model:
Identify the separate performance obligation
Proposal in the ED Revised model
The separate performance
obligation identified
Accounted for separately only if In some cases the risks to the
distinct (´tydligt urskiljbar´): entity of providing goods/services
• if sold separately by the entity or are inseparable: single
another entity; or performance obligation.
• if a distinct function and a In all other cases a separate
distinct profit margin. performance obligation if
• a good/service is distinct; and
• the pattern of transfer is
different from other transfers.
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14. Summary of the Revenue recognition model:
Identify the separate performance obligation
Proposal in the ED Revised model
Warranties
(1) If for latent effects: not a (1) If an option to purchase a
separate performance warranty separately: a
obligation. A provision is separate performance
recognised. obligation and allocation of
(2) If for faults that arise after the revenue to the service.
products are transferred to the (2) If not such option: (a) a cost
customer: a separate accrual, unless (b) the
performance obligation. warranty provides a service to
In both cases thus deferral of the customer (under
revenue. circumstances specified in the
revised model).
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15. Example: Revenue allocation
Case 1. A telecom coy sells a mobile phone and unlimited calls and texts
to Cust. A. The phone is free if the customer signs up for a year; the
network service is CU40 pm.
Case 2. The coy also sells the same phone to Cust. B for CU300, with the
same service provided for at CU15 pm.
At present: Case 1. Probably no revenue on the phone and revenue of
CU40 pm. Case 2. Revenue on the phone CU300 and revenue of CU15
pm. Thus revenue attributed to main deliverables.
Under the proposal: Revenue would be recognised at similar
amounts for each phone and service based on (estimated) selling prices,
see Step 4 below. Thus revenue depicts transfer to customers and is
allocated to all performance obligations, not just main deliverables.
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16. Summary of Revenue recognition model. Step 3:
Determining the transaction price
Proposal in the ED Revised model
Definition of the transaction price
The amount of consideration an No significant change.
entity receives, or expects to
receive, in exchange for
transferring goods or services.
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17. Summary of the Revenue recognition model.
Determining the transaction price.
Proposal in the ED Revised model
Uncertain consideration
The transaction price should What is most predictive:
reflect the probability-weighted • the probability weighted amount
amont of the consideration.
• the most likely amount.
Only if the transaction price can be
reasonbly expected. Allocate price to a satisfied
performance obligation ´unless the
Conditions to be met (e.g similar entity is not reasonably assured
types of contracts). (´saknar rimliga garantier´) to be
entitled (´ha rätt ´) to that
amount´.
Circumstances specified.
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18. Summary of the Revenue recognition model.
Determining the transaction price.
Proposal in the ED Revised model
Other
Reduce the amount to reflect the Do not reflect the effects of a
customer´s credit risk. customer´s credit risk. Recognise
an allowance for any expected
impairment loss.
Adjust the promised amount to
reflect the time value of money Adjust the promised amount to
reflect the time value of of money,
if the financing component is
significant.
Various factors to be considered.
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19. Summary of the Revenue recognition model. Step
4: Allocate the transaction price to the perf. oblig.
Proposal in the ED Revised model
An entity should allocate the No material change.
transaction price to the separate If the standalone selling price is
performance obligations in highly variable, a residual
proportion to the standalone technique may be used (reference
selling price (estimated if to the total transaction price less
necessary). the less the standalone selling
prices of other goods or services).
Conditions to be met when the
transaction price is allocated to
one or more performance
obligations.
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20. Summary of the Revenue recognition model. Step
5: Recognise revenue when a perf. obl. is satisfied
Proposal in the ED Revised model
Recognise revenue when the No change to core principle.
customer obtains control of the Indicators on when the customer has
promised goods or service (when obtained control of a good (e.g.
the customer has the ability to physical poss., risks and rewards).
direct the use of/receive the benefit
from the good or service). Criteria on when a performance
Indicators on when control has obligation for services is satisfied
been obtained. over time, at least one of:
(No specific guidance for • The entity´s performance creates
determining when a performance or enhances an asset,
obligation is satisfied over time). • If not, a benefit received, (a few
alternative criteria to be met).
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21. Summary of Revenue recognition model: Contract
costs
Proposal in the ED Revised model
Cost of obtaining a contract
As an expense when incurred. Recognise an asset for the
incremental costs of obtaining a
contract that the entity expects to
recover.
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22. Summary of Revenue recognition model.
Recognise revenue when a perf. obl. Is satisfied.
Proposal in the ED Revised model
Measuring progress
A performance obligation satisfied No change.
continuosly: select one method and Recognise revenue only if the
apply it consistently.. entity can reasonably measure its
progress toward successful
completion.
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23. Summary of the Revenue recognition model.
A short summary
• No change for many transactions
• Principles-based standard to give robust application
- Reduces need for interpretations
- Prevent gaps being filled by local or imported ´rules´
• A single, global revenue recognition framwork across all industries
and all markets
• Revenue attributed to all performance obligations, not just main
deliverables
• Use of estimates when separating obligations better reflects transfer
of different deliverables.
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24. What happens next?
• As noted a new ED to be published in October 2011 (Q3 was
intended)
• Focus is on drafting as well as re-exposure of a selected number of
change in the 2010 ED
• Will be out for comments for 120 days
• Effective date?
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