FASB decides to retain guidance on pre-production costs
Defining Issues | October 2016
Speakers from regulators, standard setters and others discussed recent developments in accounting, auditing and financial reporting – and KPMG observations.
KPMG reports on FASB decision on pre-production costs. FASB retains current guidance on capitalization of pre-production costs while doing outreach for potential additional changes.
Applicability
FASB tentative Board decisions
- ASC Topic 606 (new revenue standard)
- Related ASC Subtopic 340-10 amendments
- Company that incurs pre-production costs in long-term supply arrangements
Relevant dates
- October 19, 2016 – FASB tentative decision on pre-production cost guidance
- Mandatory effective dates and early adoption provisions of ASC Topic 606:
Effective date | Public business entities and certain not-for-profit entities | All other entities |
Annual periods – Fiscal years beginning after | Dec. 15, 2017 | Dec. 15, 2018 |
Interim periods – In fiscal years beginning after | Dec. 15, 2017 | Dec. 15, 2019 |
Early adoption allowed in fiscal years beginning after | Dec. 15, 2016 | Dec. 15, 2016 |
Key Impacts:
- The FASB was considering amending the pre-production cost guidance for long-term supply arrangements that would affect companies applying ASC 606 (new revenue standard).
- Pending further outreach, the FASB has tentatively decided not to change the guidance on pre-production costs.
- This means that suppliers should continue to evaluate whether consideration received from a customer for pre-production activities should be accounted for under ASC 606 as a separate performance obligation. The related costs should continue to be assessed under ASC 340-10.
Report contents
- Current capitalization guidance
- Leases, sale-leaseback concerns
- Interaction with revenue standard
Download the document:
FASB retains guidance on pre-production costs
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