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Revenue rule prompts edit to collaborative arrangements text

Tammy Whitehouse | May 8, 2018

The Financial Accounting Standards Board has proposed an update to accounting standards to make some targeted improvements to the guidance on accounting for collaborative arrangements, or “virtual” joint ventures.

Under Generally Accepted Accounting Principles, a collaborative arrangement is one where two or more parties enter a contractual relationship to actively participate in a joint operating activity. It's a little different from a true joint venture because it does not involve the creation of a standalone legal entity. Historically, accounting guidance has not provided explicit requirements for how to recognize or measure any proceeds generated through collaborative arrangements, so companies have developed different practices, FASB says.

Some companies, for example, apply revenue recognition guidance, directly or by analogy, to all or a portion of the arrangement; others apply a different accounting method as an accounting policy. That produces different...

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