Revenue Disclosure Rules on Contract `Backlog’to Be Altered

The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...

By Steve Burkholder

Oct. 19 — Media and entertainment companies, credit card processing enterprises, and other companies won’t have to disclose certain revenue amounts stemming from backlogs deemed to be in “the pipeline,” under U.S. accounting rulemakers’ decisions to amend far-reaching revenue rules.

Footnote reporting on such amounts from certain “remaining performance obligations”--including on royalties from licenses of intellectual property--won’t be required, as they would have been in the version of the revenue recognition standard the Financial Accounting Standards Board issued more than two years ago (ASU 2014-09).

The board also added an effective exception from such quantitative disclosures for series of regular transactions, such as those reported by companies that process transactions using Visa, MasterCard, and American Express cards.

However, companies still will have to describe the nature and duration of remaining performance obligations, as well as provide other qualitative disclosures on any backlogs of revenue-generating contracts.

Technical Correction

A divided FASB made those decisions as it advanced a small set of “technical corrections and improvements” to the revenue standard. The revenue standard was issued jointly with the International Accounting Standards Board in May 2014. Many thousands of companies worldwide will have to shift to the new rules in January 2018. Companies can choose to adopt the new standards a year earlier.

FASB plans to issue the limited-scope guidance containing the corrections and improvements by Dec. 31.

Linking Disclosures With Recognition, Measurement

A key motivation for the board’s shift away from the 2014 rules’ wider prescriptions on quantitative disclosures of remaining performance obligations is linking disclosures with recognition and measurement under the standard.

If enterprises don’t have to estimate amounts stemming from such obligations, then they shouldn’t have to disclose those amounts in footnotes to the financial statements, FASB reasoned.

When the revenue rules were issued, FASB Chairman Russell Golden described benefits from the disclosures that allows investors to better understand “the pipeline to revenue,” what is commonly called “backlog.”


FASB members Marc Siegel and Harold Schroeder plan to dissent to the issuance of the planned guidance embodying corrections and improvements. They disagree with other board members on the backlog disclosure issue. Siegel and Schroeder spoke of the quantitative disclosures being valuable to investors and, as Schroeder put it, filling a large hole in the financial statements.

Other board members, such as James Kroeker and Lawrence Smith, cautioned against opening up disclosure issues that would delay the long-awaited application of the important revenue recognition standards.

To contact the reporter on this story: Steve Burkholder at

To contact the editor responsible for this story: S. Ali Sartipzadeh at

For More Information

A FASB meeting handout on the revenue recognition issues discussed Oct. 19 is available at: The board will soon post a summary of tentative decisions made at the meeting at:

Copyright © 2016 Tax Management Inc. All Rights Reserved.

Request Financial Accounting