Key attributes of the revised exposure draft
- Introduces a single revenue recognition model that would apply to all contracts with customers
- Sets out two approaches to recognizing revenues:
- over time, which is similar to current percentage of completion accounting
- at a point in time, which is similar to current accounting for the sale of goods
The model features a contract-based, five-step analysis of transactions to determine whether and how much revenue is recognized. The five steps are:
- Identify the contract with the customer
- Identify the separate performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the separate performance obligations in the contract
- Recognize revenue when (or as) each performance obligation is satisfied
A final standard is expected to be issued in the first half of 2013.
Please contact your KPMG Accounting Advisory Services adviser for more information.