United States

ASC 606 and certain transactions in collaborative arrangements


Topic 808 of the FASB’s Accounting Standards Codification (ASC), “Collaborative Arrangements,” defines a collaborative arrangement as a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. ASC 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements often is based on an analogy to other accounting literature or an accounting policy election. The issuance of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), raised new questions about the interaction between ASC 808 and ASC 606.

To provide guidance on whether certain transactions between collaborative participants should be accounted for as revenue in accordance with the guidance in ASC 606, the FASB recently issued a proposed ASU, Collaborative Arrangements (Topic 808): Targeted Improvements. If finalized, the proposed ASU would:

  • Add unit-of-account guidance in ASC 808 to align with the guidance in ASC 606 (that is, a distinct good or service) limited to when an entity is assessing the scope of ASC 606.
  • Clarify that certain transactions between collaborative participants should be accounted for as revenue under ASC 606 when the collaborative participant is a customer in the context of the unit of account. In these situations, all of the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements.
  • Clarify that in a transaction that is not directly related to sales to third parties, presenting the transaction as revenue would be precluded if the collaborative participant counterparty is not a customer.

The proposed ASU is available for comment until June 11, 2018.