The agenda request asked the Board to clarify if, and when, transactions in a collaborative arrangement were within the scope of the revenue guidance in Topic 606. The amendments improve comparability by allowing the presentation of the units of account in collaborative arrangements that are within the scope of Topic 606 together with revenue accounted for under Topic 606. Examples of transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant may include (a) sales of production inputs or other items to a collaborative arrangement participant that are eventually sold to a third party or (b) profit share receivables from collaborative arrangement participants for sales to third parties. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. PwC. A nonmonetary exchange shall be measured based on the recorded amount (after reduction, if appropriate, for an indicated impairment of value as discussed in paragraph 360-10-40-4) of the nonmonetary asset(s) relinquished, and not on the fair values of the exchanged assets, if any of the following conditions apply: a. Overall, respondents supported the Boards efforts to clarify when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606. A creditor that measures impairment based on the present value of expected future cash flows is permitted to report the entire change in present value as bad-debt expense. endstream endobj 1375 0 obj <>stream Clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context ofa unit of account. 7, an entity-specific value attempts to capture the value of an asset or liability in the context of a particular entity. Select a section below and enter your search term, or to search all click Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, Property, plant, equipment and other assets, {{favoriteList.country}} {{favoriteList.content}}, follow the guidance for business combinations and measure NCI at fair value on the date of acquisition in accordance with. Poland stamp catalogue. Welcome to Viewpoint, the new platform that replaces Inform. Overview. A noncontrolling interest (NCI) is the equity interest in a subsidiary that is not attributable, directly or indirectly, to the parent. The reporting entity should apply judgment in determining whether a production level is within the range of normal capacity considering various business- and industry-specific factors. The Board decided not to add additional examples or additional aspects to the existing examples because doing so would have been beyond the projects objective and scope. Financial Accounting Foundation claims no copyright in any portion hereof that constitutes a work of the United States Government. Company A has previously made an accounting policy election to analogize to the business combinations guidance in remeasuring previously held equity interests in an asset acquisition. BC30. Those accounting differences result in diversity in practice on how entities account for transactions on the basis of their view of the economics of the collaborative arrangement. BC12. EY helps clients create long-term value for all stakeholders. The Board decided to permit an entity to early adopt the amendments in this Update, including adoption in any interim period, if the entity has already adopted or is concurrently adopting Topic 606. Some entities apply revenue guidance directly or by analogy to all or part of their arrangements, and others apply a different accounting method as an accounting policy. The Board chose not to expand the scope of the project to include arrangements structured within a legal entity (such as joint ventures). Normal capacity is the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, ASU 2018-18Collaborative arrangements (Topic 808)Clarifying the interaction between Topic 808 and Topic 606, {{favoriteList.country}} {{favoriteList.content}}. Using Q&As and examples, this new guide explains in detail the accounting for general employee compensation, nonretirement postemployment benefits, retirement benefits and employee stock ownership plans (ESOPs). BC23. In other words, the reporting entity should account for the sale the same way it accounts for sales to other customers. FSP Corp enters into a supplier agreement with Toy Company to purchase board games to sell through its website. In making that decision, the Board acknowledged the different accounting models and outcomes between transactions involving a collaborative arrangement as defined in Topic 808 and those involving a separate legal entity with similar characteristics. It has also been updated to further enhance and clarify our interpretive guidance in several areas. Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. Pending Content System for filtering pending content display based on user profile. Accounting Standards CodificationWhat You Get. Copyright 2023 Deloitte Development LLC. Welcome to Viewpoint, the new platform that replaces Inform. Therefore, an entity may still analogize to those principles provided that the entity does not present the transaction together with revenue. BC34. The entity-specific value of the asset(s) received differs from the entity-specific value of the asset(s) transferred, and the difference is significant in relation to the fair values of the assets exchanged. Please seewww.pwc.com/structurefor further details. This content is copyright protected. The Board decided against providing recognition and measurement guidance for transactions with collaborative arrangement participants directly related to sales to third parties as part of this project. The amendments in this Update should be applied retrospectively to the date of initial application of Topic 606. The amendments in this Update are not intended to address transactions with a collaborative arrangement participant that are directly related to sales to third parties of either participant and, therefore, do not result in changes to the presentation of those transactions. X[7? Disclosure of unusual amounts, net of applicable income taxes, and their earnings per share effect, net of applicable income taxes, is permissible only in the footnotes. endstream endobj 1369 0 obj <>/Metadata 136 0 R/Outlines 177 0 R/PageLayout/OneColumn/Pages 1360 0 R/StructTreeRoot 254 0 R/Type/Catalog>> endobj 1370 0 obj <>/Font<>>>/Rotate 0/StructParents 0/Type/Page>> endobj 1371 0 obj <>stream Those respondents requested that the Board clarify whether it intended to preclude the aggregation of other sources of revenue from collaborative arrangements with revenue that is within the scope of Topic 606 or to more generally preclude revenue presentation. Before the issuance of Topic 606, stakeholders indicated that revenue from collaborative arrangements may have included (1) revenue that was recognized in accordance with Topic 605, Revenue Recognition, (2) revenue that was recognized through analogy to the guidance in Topic 605, and (3) revenue that was recognized through the application of a policy election. Some respondents requested that the Board clarify certain aspects of the proposed amendments. The amendments in this Update make targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements as follows: The amendments in this Update provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606. However, we believe settlement gains and losses relating to preexisting relationships should generally be recognized in the income statement consistent with the guidance for business combinations in, For example, assume Company A is a defendant in litigation relating to a patent infringement claim brought by Company B. The EITF did not provide specific recognition and measurement guidance because of the difficulty in developing a single accounting model that could be applied to the wide range of different collaborative arrangements. The configuration of future cash flows is composed of the risk, timing, and amount of the cash flows. Those entities are analogizing to those Topics either because the scope of the revenue guidance is not directly applicable or because the interaction between Topic 808 and those Topics is unclear. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. The Board ultimately decided that the scope of the revenue guidance in Topic 606 should be aligned for units of account inside and outside collaborative arrangements; that is, the revenue guidance in Topic 606 should be applied if the collaborative arrangement participant is a customer in the context of a given unit of account. Entities involved in collaborative arrangements observed that, in some situations, a collaborative arrangement participant contracts to obtain goods or services that are the output of an entitys ordinary activities. Both in the agenda request and in other outreach, many preparers indicated that identifying the unit of account in a collaborative arrangement, especially during the development phase, can be challenging because of the ongoing nature of the arrangement. Sharing your preferences is optional, but it will help us personalize your site experience. Subsequentchanges in the recorded amount of contingent consideration should generally be recognized as an adjustment to the cost basis of the acquired assets, by analogy to. [uLBCn20x10DY5fS ] yD@YC Hw15A1 B s\A0W+d g"p&g"p&xc&>>>>>>J^QW+u_W+sSMs=*zTQGe=z4o7o7Y*+m}RsF.0x BC24. Our FRD publication on business combinations has been updated to reflect the issuance of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Replaces Inform other customers may still analogize to those principles provided that the board clarify certain aspects of proposed... Amount of the proposed amendments sometimes refer to the date of initial application of 606. Is composed of the United States Government to Viewpoint, the new platform that replaces Inform composed of the,. In several areas the risk, timing, and may sometimes refer to the member. 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