The Board decided not to add additional examples or additional aspects to the existing examples because doing so would have been beyond the projects objective and scope. 2014-09. Please see www.pwc.com/structure for further details. Where depreciation and amortization is classified in the statement of operations depends on therelatedassets function. Obligations of the acquirer to transfer additional assets or equity interests based only upon the passage of time do not represent contingent consideration and instead may represent seller financing. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. This edition of On the Radar offers guidance for translating the accounts of foreign entities as advised under ASC 830, otherwise known as the "functional . We use cookies to personalize content and to provide you with an improved user experience. This was consistent with comments from respondents who stated that providing a year for implementation would provide entities that have extensive collaborative arrangements with adequate time to review their contracts. The carrying value of Company As investment is $100,000 and its fair value is $500,000. Accordingly, the amendments in this Update do not result in any changes to the accounting for those transactions. It is for your own use only - do not redistribute. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. If the latter, some respondents disagreed because it would negatively affect performance measures that provide users with useful information. The Board concluded that no additional recurring disclosures are necessary because of the projects limited scope and because the current disclosures in Topics 606 and 808 are robust. Like the depreciation or amortization of tangible long-lived assets, the amortization of intangibles may be included in operating expenses or cost of sales, depending on the use of the asset. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. If Company A subsequently buys the intellectual property that is subject to the patent infringement from Company B, Company A would need to assess whether some of the consideration transferred should be accounted for separate from the asset acquisition transaction for the settlement of a preexisting relationship (i.e., ascribe some of the value to the effective settlement of the lawsuit). By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. The issuance of Update 2014-09 on revenue from contracts with customers heightened the need for clarity on whether the guidance in Update 2014-09 applies to collaborative arrangements. Kompatybilno: Dla Fiat: Dla Fiat ABARTH Punto 1992012.03-Dla Fiat Doblo I Estate 119, 223 2001.03-2019Dla Fiat Doblo I Cargo 223 2001.03-2010Dla Fiat Fiorino III box/kombi 225 We bring together extraordinary people, like you, to build a better working world. In addition, the Board clarified that for a unit of account that is within the scope of Topic 606, an entity is required to apply all the accounting requirements in Topic 606 to that unit of account, including the recognition, measurement, presentation, and disclosure requirements. Yq:W+pM|v{ PwC. However, some respondents noted that diversity in practice related to collaborative arrangements will continue to exist given the diverse nature of those arrangements. Show All in One Page feature for viewing user-selected excerpts. Copyright 2023 Deloitte Development LLC. All rights reserved. The Board noted that current guidance allows an entity to evaluate the terms of a collaborative arrangement to determine how best to account for and present those transactions. hb```yl9B Because of the proposed models flexibility, certain participants raised concerns that the model would be difficult to apply and that it may not solve many of the challenges raised about recognition. Consequently, overriding an entitys ability to consider the specific terms of its arrangements and the nature of its ordinary activities and precluding revenue recognition broadly for collaborative arrangements could have resulted in less relevant financial reporting because the accounting may not have reflected the nature and economics of the arrangement. BC8. Clarified that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of the unit of account. endstream endobj 1372 0 obj <>stream endstream endobj 1369 0 obj <>/Metadata 136 0 R/Outlines 177 0 R/PageLayout/OneColumn/Pages 1360 0 R/StructTreeRoot 254 0 R/Type/Catalog>> endobj 1370 0 obj <>/Font<>>>/Rotate 0/StructParents 0/Type/Page>> endobj 1371 0 obj <>stream Company A has previously made an accounting policy election to analogize to the business combinations guidance in remeasuring previously held equity interests in an asset acquisition. If it is determined that the transaction has commercial substance, the exchange would be measured at fair value, rather than at the entity-specific value. Disclosure of unusual amounts, net of applicable income taxes, and their earnings per share effect, net of applicable income taxes, is permissible only in the footnotes. The $5 million allocated to the TSA would be recognized as an asset for the prepayment of the services and would be expensed as the services are provided over a one-year period. All rights reserved. The approach selected should be applied consistently. 6JK&S~cg34Gs&Je=6UpY5:#lL10,@,1@c4WTcZ0wt}G,! 1 0 obj Therefore, the reseller should recognize reimbursements for vendors sales incentives that meet the criteria in. Before the issuance of the amendments in this Update, an entity was not precluded from presenting payments received in a collaborative arrangement that are not within the scope of other Topics as revenue. Other respondents requested clarity on how to interpret. The Board also acknowledged the need to clarify the items in the agenda request on a timely basis given the effective date of Topic 606. BC2. BC11. hXmo6+ah#)j+&]&BbGNR,/Z!$2.J+ry)7'HT2bU h2^,AT=DYJ Such items shall not be reported on the face of the income statement net of income taxes. Disclosure shall be made in the financial statements of the total research and development costs charged to expense in each period for which an income statement is presented. The Board also did not address the accounting for nonrevenue transactions between collaborative arrangement participants. Such arrangements should be accounted for separate from the asset acquisition. Other respondents requested that the Board clarify whether transactions directly related to sales to third parties are within the scope of Topic 606. The reporting entity should apply judgment in determining whether a production level is within the range of normal capacity considering various business- and industry-specific factors. 848-20 Contract Modifications. BC18. For purposes of this guidance, the phrase vendor's sales incentive offered directly to consumers is limited to a vendor's incentive that meets all the following criteria: PwC. BC32. Assuming the water bottles are initially held in inventory by FSP Corp prior to their eventual sale, the cost of the inventory would be reduced by $10,000 on a per unit basis such that cost of sales will be reduced when recognized in FSP Corps income statement. The Board decided to focus on targeted improvements to clarify when certain transactions between collaborative arrangement participants are within the scope of the revenue guidance in Topic 606. In general, the disclosure shall encompass important judgments as to appropriateness of principles relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following: endstream endobj 1376 0 obj <>stream Outreach indicated that, under current GAAP, many entities analogize to the accounting for revenue under Topic 605 or Topic 606 when accounting for transactions between collaborative arrangement participants. Terms of reimbursement to the reseller for the vendor's sales incentive offered to the consumer must not be influenced by or negotiated in conjunction with any other incentive arrangements between the vendor and the reseller but, rather, may be determined only by the terms of the incentive offered to consumers. [0p?'7l:u# YKD~2.o},P[ V p:dN#|eA^{k#l[0%8gT+ The agenda request asked the Board to clarify if, and when, transactions in a collaborative arrangement were within the scope of the revenue guidance in Topic 606. In both scenarios, the reseller generally has no control over which consumers receive or choose to apply these incentives. 0 FSP Corp should recognize the consideration received as a reduction of the purchase price of the water bottles because it has not provided a distinct good or service to Water Company in exchange for this fee. The Board agreed that the amendments will benefit users by reducing diversity in practice by clarifying that certain transactions between collaborative arrangement participants should be accounted for in accordance with the guidance in Topic 606 and by clarifying certain presentation requirements. Company A determines that the transaction should be accounted for as an asset acquisition, as the legal entity acquired does not constitute a business. A change in contingent consideration impacts the cost basis of acquired assets, which may also impact the income statement through subsequent accounting for the acquired asset. Some respondents requested that the Board clarify in what sequence the unit-of-account guidance should be applied. There are many different types of collaborative arrangements, and the accounting for any collaborative arrangement depends on the specific negotiated terms. Revenue from Contracts with Customers (Topic 606), Company name must be at least two characters long. The guidance also states: A counterparty to the contract would not be a customer if, for example, the counterparty has contracted with the entity to participate in an activity or process in which the parties to the contract share in the risks and benefits that result from the activity or process (such as developing an asset in a collaboration arrangement) rather than to obtain the output of the entitys ordinary activities. An entity may not adopt the amendments earlier than its adoption date of Topic 606. %PDF-1.7 The observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan may change from one reporting period to the next. The Board decided to permit an entity to early adopt the amendments in this Update, including adoption in any interim period, if the entity has already adopted or is concurrently adopting Topic 606. See. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. Our FRD publication on business combinations has been updated to reflect the issuance of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. BC4. See, If the amount of consideration received from the vendor exceeds the standalone selling price of the distinct good or service that the reporting entity transfers to the vendor, the reporting entity should account for the excess amount pursuant to the general principle for vendor consideration (i.e., as a reduction of the purchase price of the goods or services acquired from the vendor). The SEC staff has acknowledged that, in some cases, a reporting entity may be able to support more than one conclusion based on the existing accounting literature. Respondents agreed that no additional disclosures are necessary. BC29. The fair value of the group of assets is $95 million. An entity may elect to apply the amendments in this Update retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606. 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