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Accounting Staffer Informs FASB’s EITF of Rescission of Some Revenue Guidance

The SEC rescinded four pieces of its revenue recognition guidance in U.S. GAAP to reflect the FASB’s 2014 adoption of its landmark revenue standard. The rescissions deal with the views of the staff of the agency’s chief accountant on revenue guidance from the board’s Emerging Issues Task Force (EITF).

The SEC rescinded four pieces of its revenue recognition guidance in U.S. GAAP to reflect some of the amendments to U.S. GAAP in the FASB’s May 2014 Accounting Standards Update (ASU) No. 2014-09, Revenue From Contracts With Customers (Topic 606), Wes Bricker, an SEC deputy chief accountant, told the board’s Emerging Issues Task Force (EITF) on March 3, 2016.

“Registrants should not rely on the following staff observer comments on the adoption of ASC 606,” Bricker said.

The four pieces of rescinded guidance are:

  • Revenue and expense recognition for freight services process in FASB ASC 605-20-S99-2, SEC Observer Comment: Revenue and Expense Recognition for Freight Services in Process, formerly part of EITF Issue No. 91-09, which expresses the SEC’s staff views on FASB ASC 605-20-25-13, Revenue Recognition — Services;
  • Accounting for shipping and handling fees and costs in FASB ASC 605-45-S99-1, Revenue Recognition — Principal Agent Considerations — SEC Materials, formerly part of EITF Issue No. 00-10, which provides the views of the SEC on FASB ASC 605-45-45-20, Revenue Recognition — Principal Agent Considerations — Other Presentation Matters, and FASB ASC 605-45-50-2, Revenue Recognition — Principal Agent Considerations — Disclosure;
  • Accounting for consideration given by a vendor to a customer in FASB ASC 605-50-S99-1, Revenue Recognition — Customer Payments and Incentives — SEC Materials, formerly part of EITF Issue No. 01-09, which expresses the SEC’s staff view that the expense associated with a “free” product or service delivered at the time of sale of another product or service should be classified as a cost of sales; and
  • Accounting for gas balancing arrangements in FASB ASC 932-10-S99-5, Revenue Recognition — Customer Payments and Incentives — SEC Materials, formerly part of EITF Issue No. 90-22, which says the SEC staff had no opinion on whether the entitlement method or sales method should be used for gas-balancing arrangements, which involve the rights to production over time from a well, or wells, that are jointly owned.

The SEC, by practice, periodically announces changes to its staff guidance on EITF issues at task force meetings.

For in-depth analysis of the FASB’s revenue recognition standard, please see Catalyst: GAAP Critical Issues — Revenue Recognition, also on Checkpoint.