Accounting Exposure Draft

In: Business and Management

Submitted By cindyzhou11
Words 3880
Pages 16
Exposure Draft:
Revenue Recognition (Topic 605): Revenue from Contracts with Customers
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have publishing this exposure draft as revenue is a vital number that financial statement users use to value a company’s performance. Both Boards require improvements in their revenue recognition requirements, therefore joined forces to refine the principles for revenue recognition.
The goal of the FASB and the IASB is to “develop a common” revenue recognition principle that would: 1. Strengthen the current revenue recognition procedure; 2. Enhance revenue recognition procedures throughout organizations; and 3. Provide a simplified method of preparing financial statements.
The proposal would affect all organizations that “enter into contracts to provide goods and services” (Financial Accounting Standards Board, June 2010) which they would normally provide.
The following questions will be addressed to clarify our position on the Exposure Draft:
Question 1: Paragraphs 12 – 19 (see Exhibit A) propose a principle (price interdependence) to help an entity determine whether to: a.) Combine two or more contracts and account for them as a single contract; b.) Segment a single contract and account for it as two or more contracts; and c.) Account for a contract modification as a separate contract or as part of the original contract.
Do we agree with that principle? If not, what principle would you recommend, and why, for determining whether (a) to combine or segment contracts and (b) to account for a contract modification as a separate contract?
We agree with the principle that price interdependence would help determine whether to combine or segment contracts and whether to treat a contract modification as a separate contract for revenue recognition…...

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