News Release 02/14/19

FASB Issues Proposal and Invitation to Comment on Recognizing and Measuring Deferred Revenue in Business Combinations

Norwalk, CT, February 14, 2019—The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) and Invitation to Comment (ITC) on the recognition and measurement of deferred revenue in business combinations. Stakeholders are encouraged to review and provide input on the proposed ASU and ITC by April 30, 2019.
Stakeholders observed that diversity exists on whether and how to record deferred revenue in a business combination. The Emerging Issues Task Force (EITF) worked with the FASB to develop a proposed standard and an Invitation to Comment to solicit feedback on these issues.
The proposed ASU clarifies when acquiring organizations should recognize a contract liability in a business combination. In the proposal, an organization should recognize deferred revenue from acquiring another organization if there is an unsatisfied performance obligation for which the acquired organization has been paid by the customer.
The ITC asks stakeholders to provide feedback and ideas on measurement and other issues related to acquiring contracts with customers in business combinations:
  1. Payment terms and their effect on the subsequent revenue recognized, and
  2. Costs to fulfill a performance obligation in measuring the fair value of a contract liability for a revenue contract.  
The proposed ASU and ITC are available at

About the Financial Accounting Standards Board

Established in 1973, the FASB is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit