Derivatives Scope Refinements and Scope Clarification for a Share-Based Payment from a Customer in a Revenue Contract (BDO Comment Letter)
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In September 2024, the FASB proposed amendments to:
- Exclude from derivative accounting certain contracts with underlyings that are based on the operations or activities of one of the parties to the contract. It would also change the predominant characteristics assessment for multiple underlyings of certain contracts that are not traded on an exchange.
- Clarify that an entity should apply ASC 606, Revenue from Contracts with Customers, including the guidance on noncash consideration, to a contract with a share-based payment from a customer that is a consideration for the transfer of goods or services.
In our comment letter, BDO supported the Board’s proposals to refine the derivatives scope exception and to clarify that an entity should apply the guidance in ASC 606 to a share-based payment from a customer as consideration in a revenue contract. BDO also suggested clarifications and changes on certain aspects of the proposals.