IASB and FASB October 2007

In 2002 the Board launched its project on revenue recognition jointly with the FASB. The objective of the project is to develop a single coherent asset and liability model for revenue recognition. In such a model, revenue is a function of changes in assets and liabilities and is not based on the notions of realisation and the completion of an earnings process.

Throughout 2002–2006 the boards explored a model in which the assets and liabilities would be measured at fair value (a fair value model) and a model in which the assets and liabilities would be measured by reference to the customer consideration (an allocated customer consideration model).

In October 2006 the boards decided that instead of trying to forge a single, compromise model at this stage in the project, they should aim to get a better and more complete understanding about what both models would look like and what each would entail. They also decided that an initial due process document should explain and illustrate the two models and that this would form a basis for seeking comments from interested parties.

Therefore, over the past year, the staff and two groups of board advocates (each drawn from both boards) have developed two revenue recognition models. At this meeting, the staff provided a summary of each of the models together with some examples. The summaries and the examples were included in the observer notes for the meeting, available on the Website.

The session was primarily educational and no technical decisions were taken. Board members commented on aspects of the models that they wanted to see explained more fully in subsequent meetings.