Comparison between U.S. GAAP and International ... - Grant Thornton

Comparison between U.S. GAAP and International Financial Reporting Standards 70
6. Income and expenditure
6.1 Revenue - general
Note: In June 2010, the IASB and FASB issued proposed guidance, Revenue from Contracts with Customers, as part
of a joint project to develop a common revenue recognition standard for IFRS and U.S. GAAP. The proposed guidance
would supersede the guidance in IAS 18, Revenue, and IAS 11, Construction Contracts, and most existing guidance in
ASC 605, Revenue Recognition. The proposed guidance would establish principles that entities would apply to provide
financial statement users with useful information about the amount, timing, and uncertainty of revenue and cash flows
resulting from contracts with customers.
The proposed guidance would apply to most contracts with customers to provide goods or services. It would not apply
to certain contracts that are within the scope of other generally accepted accounting standards, such as lease
contracts, insurance contracts, financial instruments, and nonmonetary exchanges between entities in the same line of
business to facilitate sales to third party customers.
The core principle of the proposed guidance would require an entity to recognize revenue in a manner that depicts the
transfer of control of goods or services to customers in an amount that reflects the consideration the entity receives or
expects to receive for those goods or services. To apply this principle, an entity would apply the following steps:
• Identify the contract with a customer
• Identify the separate performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to each separate performance obligation
• Recognize revenue as the entity satisfies each performance obligation
The Exposure Draft does not specify an effective date because the Boards plan to separately address the effective
dates for all of their convergence projects. Entities would be required to apply the new revenue guidance
retrospectively.
The Boards received significant feedback on the proposed guidance through the comment letter process, roundtable
discussions, and outreach activities and are in the process of redeliberating the conclusions in the proposed guidance.
The Boards have targeted June 2011 as the date a final standard will be issued.
IFRS
Relevant guidance: IAS 18; IFRIC 13, 15, and 18; SIC-
31
U.S. GAAP
Relevant guidance: ASC 605, 845, and industry topics;
SFAC 5 and 6; SEC SAB Topic 13
Introduction
The term revenue encompasses the gross inflow of
economic benefits during the period arising in the course
of ordinary activities when those inflows result in
increases in equity, other than increases relating to
contributions from equity participants (IAS 18.7).
IAS 18 is a general standard on revenue recognition, it
applies to revenue from (IAS 18.1):
• The sale of goods
• The rendering of services
• The use by others of enterprise assets yielding
SFAC 6.78 defines revenues as inflows or other
enhancements of assets of an entity or settlements of its
liabilities (or a combination of both) from delivering or
producing goods, rendering services, or other activities
that constitute the entity's ongoing major or central
operations.
Revenue recognition guidance in U.S. GAAP is extensive
and is included in several topics in the Codification, as
well as SEC guidance, such as SAB Topic 13 that
address specific revenue recognition issues. The content
in this section is more general and is derived primarily
from ASC 605-10, 605-15, 605-20, 605-25, and 605-45.
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