The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to FASB Proposed Accounting Standards Update (ASU) No. 2020-100, Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers. If adopted, the proposed guidance would create a limited exception to the measurement principles in Topic 805, Business Combinations, for the application of Topic 606, Revenue for Contracts with Customers, to customer contracts taken over pursuant to an acquisition.  

The FRC generally supports the proposed amendments. In its view, the proposal, if adopted, would result in the consistent application of existing revenue guidance to contracts acquired in a business combination regardless of the expected timing of customer payments. In its comment letter, the FRC raises additional insights on certain aspects of the proposal, including (1) the estimation of acquired revenue, (2) the adjustment of any recorded goodwill as a result of the applying the guidance as proposed, (3) the scope of the contracts covered by the amendments, and (4) its comparison to IFRS.