In response to criticism that the current revenue recognition disclosures are inadequate, the Boards have tried to create a comprehensive and coherent set of disclosures. As a result, the proposal includes an overall objective that the revenue recognition disclosures should enable users of the financial statements to understand the “amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.” While many wireline and wireless goods and services are sold separately, their prices may differ due to competition, state regulation, or type of customer. Telecom companies would need to consider these factors when they determine the standalone selling prices of their goods and services. Selling prices also change frequently because of competition and the introduction of new technologies. Discussions with companies within the industry lead us to believe that these requirements to determine standalone selling prices on a regular basis represents a significant challenge to the industry and may require updated systems or processes. Product vs. Process? – Product-oriented Approaches • Focus on system (or software) quality • Aim is to have a way of measuring the product once it’s built – metrics – Process-oriented Approaches • Focus on how NFRs can be used in the design process • Aim is to have a way of making appropriate design decisions • Quantitative vs. Qualitative? – Quantitative Approaches • Find measurable scales for the quality attributes • Calculate degree to which a design meets the quality targets – Qualitative Approaches • Study various relationships between quality goals • Reason about trade-offs etc The proposed standard requires that preparers meet that objective by providing both qualitative and quantitative disclosures about: • Contracts with customers — These disclosures would include disaggregation of revenue, reconciliation of contract asset and liability balances (including liabilities due to onerous performance obligations) and information about an entity’s performance obligations. • Significant judgements (including changes in those judgements) — This would include disclosures about judgements that significantly affect the determination of the transaction price, the allocation of the transaction price to performance obligations and the determination of the timing of revenue recognition. • Assets recognised resulting from costs incurred to obtain or fulfil a contract. In their revised proposal, the Boards have clarified that the disclosures they listed in the ED are not meant to be a checklist of minimum requirements. Instead, entities would have to determine which disclosures are relevant to them. Entities also would not have to disclose items that are not material.

James Gilbert

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