Response to the Financial Accounting Standards Board’s and the International Accounting Standards Board’s Joint Discussion Paper Entitled Preliminary Views on Revenue Recognition in Contracts with Customers

SYNOPSIS: The FASB and the IASB recently issued a joint discussion paper entitled, Preliminary Views on Revenue Recognition in Contracts with Customers. The boards requested comments on whether their proposed model for revenue recognition would improve the usefulness of the financial statement information for financial decision makers. This paper summarizes the AAA’s Financial Accounting Standards Committee’s responses to several of the boards’ specific questions. We support the boards’ proposed comprehensive revenue recognition standard based on the following options: (1) the customer consideration approach (based on initial contract price measurement); (2) no recognition of revenue at contract inception (by assigning the initial contract price to performance obligations); and (3) allocation of the transaction price to multiple performance obligations based on the relative stand-alone prices of each performance obligation. We also recommend that the boards carefully consider the following clarifications ...