Accounting for contracts partially in scope of the revenue standard
There are no industries completely excluded from the scope of the revenue standard; however, the standard specifically excludes from its scope certain types of transactions:
- Leases in the scope of ASC 840, Leases, or IAS 17, Leases [ASC 842, Leases, or IFRS 16, Leases, upon adoption]
- Contracts in the scope of ASC 944, Financial Services—Insurance, or insurance contracts in the scope of IFRS 4, Insurance Contracts
- Financial instruments and other contractual rights or obligations in the scope of the following guidance:
- US GAAP: ASC 310, Receivables; ASC 320, Investments—Debt and Equity Securities; ASC 323, Investments—Equity Method and Joint Ventures; ASC 325, Investments—Other; ASC 405, Liabilities; ASC 470, Debt; ASC 815, Derivatives and Hedging; ASC 825, Financial Instruments; and ASC 860, Transfers and Servicing
- IFRS: IFRS 9, Financial Instruments; IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; IAS 27, Separate Financial Statements; and IAS 28, Investments in Associates and Joint Ventures
- Nonmonetary exchanges between entities in the same line of business to facilitate sales to current or future customers
- Guarantees (other than product or service warranties — see RR 8 for further considerations related to warranties) in the scope of ASC 460, Guarantees (US GAAP only)
Scope
The revenue standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, and financial instruments. Other items might also be presented as revenue because they arise from an entity’s ordinary activities, but are not within the scope of the revenue standard. Such items include interest and dividends. Changes in the value of biological assets or investment properties under IFRS are scoped out of the revenue standard, as are changes in regulatory assets and liabilities for certain rate-regulated entities under US GAAP. See further discussion of the scope of the revenue standard, and examples of transactions that are outside of the scope, in RR 2.Arrangements may also include elements that are partly in the scope of other standards and partly in the scope of the revenue standard. The elements that are accounted for under other standards are separated and accounted for under those standards.
Only contracts with a customer are in the scope of the revenue standard. Management needs to assess whether a counterparty is a customer to determine if the arrangement is in the scope of this guidance (for example, certain co-development projects).
