Jul 02, 2015
From the Financial Reporting Network
KPMG LLP recently commented on the proposed FASB ASU, Identifying Performance Obligations and Licensing, which is intended to reduce the potential risk of diversity in practice when entities adopt FASB ASC Topic 606, Revenue from Contracts with Customers. The effective date and transition requirements for the amendments in this proposed ASU would be the same as the effective date and transition requirements in ASC Topic 606.
The proposed ASU would clarify the criteria for evaluating whether promised goods or services are distinct in the context of the contract. It also would introduce the concept that an entity could combine promised goods and services that are immaterial in the context of the contract, and that an entity could elect to treat shipping and handling costs as fulfillment costs instead of as a separate performance obligation.
The proposed ASU also would update the implementation guidance for the license of intellectual property by categorizing intellectual property as either symbolic, which generally is recognized over time, or functional, which generally is recognized at a point in time. The proposal also would clarify that an entity should disregard contractual restrictions of time, geographical region, or use when identifying the promises in the contract.