The joint revenue recognition and leases
standards convergence projects require more time to make
significant improvements, according to a review by the European
Financial Reporting Advisory Board (EFRAG).
The current deadline to complete both projects
is June but EFRAG said
the International Accounting Standards Board (IASB) and the US
Financial Accounting Standards Board still have to work to solve a
number of concerns on the two standards identified in the course of
the consultation process.
Following the meeting with the IASB, EFRAG
also made recommendations to the boards on both standards.
EFRAG recommended the revenue recognition
• To keep the benefit of moving to one single
revenue recognition principle, the distinction between goods and
services should be dropped and transfer of control remain one of
the possible triggers for revenue recognition;
• In the absence of transfer of control, the
transfer of a right to consideration for the performance to date
should be a necessary condition in all circumstances and it should
be considered transferred notwithstanding customer potential
protective rights; and
• The no alternative use criterion, which is
arbitrary and restrictive, should be reconsidered and those such as
EFRAG’s “close association between the goods or services in
progress and the customer contract” used instead.
The recommendations EFRAG made on leases
include the boards taking another look at the definition of a