Project Update

Collaborative Arrangements—Targeted Improvements

Last updated on October 11, 2017.  Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

*Project Objective
Due Process Documents
*Decisions Reached at Last Meeting
*Tentative Board Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
*Background Information
Contact Information

*Project Objective

The objective of this project is to make targeted improvements to the guidance in Topic 808, Collaborative Arrangements, to clarify when transactions between participants in a collaborative arrangement are within the scope of the revenue guidance.

The project also includes research on a potential non-revenue model that would improve and align the financial reporting of transactions that are not within the scope of revenue guidance.

Due Process Documents

No due process documents have been issued.

*Decisions Reached at Last Meeting (October 11, 2017)

Revenue Scoping

The Board reached the following tentative decisions:
  1. Certain transactions between collaborative participants that are unrelated to third-party sales outside the collaboration could result in revenue under Topic 606.
  2. Topic 606 should be applied to identified units of accounting when the collaborative participant is a customer (in the context of the unit of accounting).
  3. When the identified units of accounting between collaborative participants are deemed to be within the scope of Topic 606, an entity is required to apply the entire accounting model in Topic 606, including recognition, measurement, and disclosure requirements.
  4. An entity is precluded from presenting a transaction with a collaborative participant as revenue if it does not meet the scope to be accounted for under Topic 606.
The Board tentatively decided not to provide additional implementation guidance to clarify the Topic 606 concepts of transfer of control and customer in the context of collaborative arrangements. However, the Board asked the staff to discuss the need for implementation guidance with stakeholders.

Unit of Accounting

The Board decided to expand the scope of the project to address the guidance for unit of accounting in Topic 808 to be consistent with the distinct goods or services guidance in Topic 606.

Non-Revenue Model

The Board asked the staff to discuss the staff’s ideas for a non-revenue model with stakeholders to obtain feedback on the potential impacts of the model to current practice and to discuss potential operational challenges with applying the non-revenue model.

*Tentative Board Decisions Reached to Date (October 4, 2017)

Tentative Board Decisions Reached to Date.

*Next Steps

The Board directed the staff to hold meetings with various stakeholders to discuss the proposed non-revenue model. At the next board meeting the staff plans to present to the Board the results of outreach with stakeholders on the non-revenue model and also discuss transition, effective date, and cost/benefit.

Please refer to the current technical plan for information about the project timeline.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*October 4, 2017

Board Meeting—Revenue Scoping, Unit of Account, and Non-Revenue Model.
November 16, 2016 Board Meeting—Added project to Board agenda.

*Background Information

Topic 808, Collaborative Arrangements, provides guidance for income statement presentation, classification, and disclosures related to collaborative arrangements. The objective of Topic 808 is to define collaborative arrangements and to establish reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. Stakeholders informed the Board that there are questions in practice about the accounting for transactions between participants in a collaborative arrangement because Topic 808 does not include recognition and measurement guidance. Specifically, questions have arisen about whether certain activities and related payments in collaborative arrangements are within the scope of the revenue guidance. Entities currently apply different approaches to account for collaborative arrangements. Some entities apply the revenue guidance to some or all elements of the arrangement. Other entities establish accounting policies for the recognition and measurement of transactions between participants, and these policies may or may not be consistent with the revenue guidance. Depending on the approach selected, there can be differences in the measurement and recognition patterns for the cash inflows and outflows from a collaborative arrangement and their classification on the income statement.

This project is aimed at making targeted improvements to clarify when transactions between partners in a collaborative arrangement within are the scope of the revenue guidance. The project also includes research on a potential non-revenue model that would improve and align the financial reporting of transactions that are not within the scope of the revenue guidance.

Contact Information

Amy Park
Practice Fellow
apark@fasb.org

Andy Bologna
Practice Fellow
abologna@fasb.org

Jared Cline
Postgraduate Technical Assistant
jcline@fasb.org