Aerospace and Defense Revenue Recognition Task Force 


AICPA Revenue Recognition Task Forces are charged with developing revenue recognition implementation issues that will provide helpful hints and illustrative examples for how to apply the new Revenue Recognition Standard.

Task Force Members:

  • Michael Wood, Raytheon (Chair)
  • Mark Bostic, Lockheed Martin
  • Michael Cleary, Boeing/General Dynamics
  • Marie Fallon, United Technologies Corporation
  • Russell Hodge, GE
  • Dan Mahoney, Northrup Grumman
  • Marc Mascola, GE Aerospace
  • Mike Miller, L-3 Communications
  • Shan Nemeth, Deloitte LLP
  • Michael Peduzzi, KPMG LLP
  • Ron Rauch, Clark Nuber P.S.
  • Alison Spivey, Ernst & Young LLP
  • Scott Thompson, PricewaterhouseCoopers LLP
Staff Contact: Kim Kushmerick, kkushmerick@aicpa.org

IDENTIFIED REVENUE RECOGNITION IMPLEMENTATION ISSUES

Below is a list of potential revenue recognition implementation issues identified by the Aerospace and Defense Revenue Recognition Task Force. The list will be updated as the task force continues its discussions. Full revenue recognition implementation issues will be posted below for informal comments after review by the AICPA Financial Reporting Executive Committee (FinREC).

The Task Force has removed and/or addressed selected implementation issues included in the original plan. They have retained the original issue #s for the table below.

Issue # Description of Implementation Issue Status
1 Acceptable measures of progress (including uninstalled materials and wasted materials)
This implementation issue will discuss items to consider when determining which method to use when measuring progress towards completion of performance obligations satisfied over time.
Exposed November 2015

2 Accounting for Contract Costs
This implementation issue will discuss considerations for applying the guidance in FASB ASC 340 for incremental costs of obtaining a contract, costs to fulfill a contract, and amortization and impairment, to costs typically incurred in aerospace and defense contracts including precontract costs and learning or start-up costs.
Exposed November 2015
3 Variable Consideration and Constraining Estimates of Variable Consideration
This implementation issue will discuss considerations for estimating the amount of variable consideration (incentive fees, award fees, economic price adjustments) in aerospace and defense contracts, the impact of subsequent modifications, and how to determine the amount of estimated variable consideration to include in the transaction price.
Exposed November 2015
4 Contract Existence and Related Issues for Foreign Contracts with Regulatory Contingencies and Unfunded Portions of U.S. Government Contracts
This implementation issue discusses how required regulatory approval impacts the determination of whether an executed/signed contract meets the criteria for existence of a contract under ASC 606, and how unfunded portions of U.S. Government contracts should apply the guidance for variable consideration.
Exposed November 2015
5 Transfer of Control on Non-US Federal Government Contracts.
This implementation issue discusses considerations for determining when non-US Government Aerospace & Defense contracts should be considered performance obligations satisfied over time rather than at one point in time.
Exposed November 2015
6 Separation/Segmentation
This implementation issue will discuss how to determine distinct performance obligations in aerospace and defense contracts that design, develop, produce, or deliver equipment such as military vehicles or specialized aircraft engines.
Submitted to AICPA RRWG
8 Contract modifications, unpriced change order, claims
This implementation issue will discuss the following considerations related to contract modifications on aerospace and defense contracts:
  • evaluating whether a modification to a contract exists,
  • how to determine whether a modification to a contract should be treated as a separate contract or part of the existing contract,
  • If a modification is treated as part of the existing contract, how does an entity determine whether the modification should be treated prospectively or through a cumulative catch-up adjustment?

Submitted to FinREC
9
Options, including loss options and loss contract guidance

10
Disclosures
12 Significant Financing Component
This implementation issue will discuss considerations needed to assess whether a significant financing component exists in determining the transaction price for various types of aerospace and defense contracts.
Exposed November 2015
14 Accounting for offset obligations

16 Allocating the Transaction Price
This implementation issue discusses considerations for determining how to allocate the transaction price to multiple performance obligations in aerospace & defense contracts.
Exposed November 2015
20 Impact of Contract Termination Rights and Penalties on Contract Term


FEEDBACK REQUESTED

Draft Revenue Recognition Implementation Issues included for informal comment, when available, will be listed below.

Respondents should submit any comments including the implementation issue number to kkushmerick@aicpa.org by the dates noted below:

Issue # Issue Comment Due Date
1-1 Acceptable measures of progress (including uninstalled materials and wasted materials) December 31, 2015
1-2 Accounting for Contract Costs
December 31, 2015
1-3 Variable Consideration and Constraining Estimates of Variable Consideration December 31, 2015
1-4 Contract Existence and Related Issues for Foreign Contracts with Regulatory Contingencies and Unfunded Portions of U.S. Government Contracts December 31, 2015
1-5 Transfer of Control on Non-US Federal Government Contracts December 31, 2015
1-12 Significant Financing Component December 31, 2015
1-16 Allocating the Transaction Price December 31, 2015


The Aerospace and Defense Revenue Recognition Task Force recommends the following AICPA products for current revenue recognition issues:



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