Group 1: Huilin Zang, Yixue Liu, Yinghui Ma
Dr. Hassan R. HassabElnaby
ACCT 6190-001
Sep. 6, 2015
FASB Proposes to Clarify Revenue Recognition Standard By Michael Cohn on August 31, 2015

After the International Accounting Standards Board (IASB) published a draft proposing changes in Revenue Recognition Standard on July 30, 2015, the Financial Accounting Standards Board (FASB) has also issued a similar proposed accounting standards update to clarify how to determine whether an entity involved in contract is a principal or an agent under the new revenue recognition standard. We found a news article written by Michael Cohn that discusses this recent FASB’s agenda in details.
The proposed update will not change the principle part of new revenue recognition standard, but will clarify the implementation guidance on principal versus agent consideration. In the new revenue recognition standard, it points out when another party is involved in providing goods or service to customer, the entity is required to determine the nature of its promise. The determination will base upon whether the entity controls the good or the service before transferring to the customer. Specifically, if control of the goods or service belongs to the entity, the entity is a principal. On the contrary, the entity is an agent. There are some implementation issues, however, during this determination process. Those issues include how to identify the nature of the good or service, or how to apply control principle to certain types of transactions, and so on.
In this case, the FASB has decided to propose an accounting standards update to address those issues related to the implementation guidance on principal versus agent. According to the article, the proposed update makes clarification from various