Article

FASB Proposes Improved Collaborative Arrangements Guidance

May 11, 2018

A newly proposed Accounting Standards Update (“ASU”) by the Financial Accounting Standards Board (“FASB”) offers organizations improved guidance regarding collaborative arrangements. The proposed ASU, Collaborative Arrangements (Topic 808): Targeted Improvements, focuses on changes to generally accepted accounting principles related to collaborative arrangements.

One proposed change includes adding unit-of-account guidance under Topic 808, which would align the guidance with Topic 606, Revenue from Contracts with Customers, limited to when a company is reviewing the nature of Topic 606.

The FASB also proposes two clarifications, such as defining when certain transactions concerning collaborative participants must be accounted for as revenue under Topic 606 when the collaborative member is a customer in the perspective of the unit of account. In such circumstances, all guidance under Topic 606 should be used. Another proposed clarification involves transactions indirectly linked to sales to third parties. In this case, if the collaborative member counterparty is not a customer, disclosing the transaction as revenue would be prohibited.

Comments on the proposal are due on Monday, June 11. The standard’s effective date will be decided after the FASB reviews all submitted comments.