On June 24, 2010, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) published for public comment a draft standard to improve and align the financial reporting of revenue from contracts with customers and related costs. If adopted, the proposal would create a single revenue recognition standard for International Financial Reporting Standards (IFRSs) and U.S. generally accepted accounting principles (GAAP) that would be applied across various industries and capital markets.
The core principle of the draft standard is that an entity should recognize revenue from contracts with customers when it transfers goods or services to the customer in the amount of consideration the entity receives, or expects to receive, from the customer. The proposed standard would improve both IFRSs and US GAAP by:
- removing inconsistencies in existing requirements
- providing a more robust framework for addressing revenue recognition issues
- improving comparability across companies, industries and capital markets
- requiring enhanced disclosure
- clarifying the accounting for contract costs
Also on June 24, 2010, the FASB and IASB issued a progress report on their convergence project, which provides details of their modified strategy to converge US GAAP and IFRS. The modified strategy retains the target completion date of June 2011 or earlier for projects they believe have the most urgent need for improvement, such as financial instruments, revenue recognition, leases, the presentation of other comprehensive income and fair value measurement. Projects they believe are a relatively lower priority, or for which further research and analysis is necessary, are now targeted for completion after the original June 2011 target date.