FASB Clarifies the Customer in Service Concession Arrangements

May 22, 2017

The Financial Accounting Standards Board (“FASB”) is providing relief to companies confused about who is the customer in a service concession arrangement. Issued as Accounting Standards Update No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, the new guidance states that the grantor is the customer in service concession arrangements.

Public companies, in addition to nonprofits that have issued, or are a conduit bond obligor for, securities traded, listed, or quoted on an exchange or an over-the-counter market and an employee benefit plan that submits financial statements to the Securities and Exchange Commission, must apply ASU No. 2017-10 to fiscal years, and interim periods within those years, starting after December 15, 2017. All other companies must apply the amendments to fiscal years starting after December 15, 2018, and interim periods within those years starting after December 15, 2019.

For companies that have not adopted Topic 606, Revenue from Contracts with Customers, prior to the issuance of ASU No. 2017-10, the effective date is the same as Topic 606.

Early adoption is permitted, conditional on certain transition requirements.