AUS 2016-08 Analysis
The Accounting Standards Update (ASU 2016-08) covers the topic "Revenues from Contracts with Customers". This move was made to bring the FASB standards more in line with IASB standards, as part of the effort to converge US GAAP with IFRS standards. The main provisions of this update are as follows. "An entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration which the entity expects to be entitled in exchange for those goods or services." This sounds fairly straightforward. To achieve this core principle, "an entity should adapt the following steps:
· Identify the contract(s) with a customer
· Identify the performance obligations in the contract
· Determine the transaction price
· Allocate the transaction price to the performance obligations in the contract
· Recognize revenue when the entity satisfies a performance obligation
The FASB notes that "the amendments do not change the core principle" but rather "clarify the implementation guidance on principal versus agent considerations."
This guidance is that when an agent is contracted to perform on the original obligation, the entity must recognize revenue upon completion of performance by the agent. If there is any revenue such as fees or commissions that accrue to the entity as the result of arranging performance...
References
FASB Accounting Standards Update 2016-08, March 2016. Retrieved November 26, 2017 from http://fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167987739&acceptedDisclaimer=true
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