[Federal Register Volume 82, Number 166 (Tuesday, August 29, 2017)]
[Rules and Regulations]
[Pages 41147-41149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17913]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 231, 241, and 271

[Release Nos. 33-10402; 34-81428; IC-32784]


Commission Guidance Regarding Revenue Recognition for Bill-and-
Hold Arrangements

AGENCY: Securities and Exchange Commission.

ACTION: Interpretation.

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SUMMARY: The Commission is publishing this interpretive release in 
order to bring existing guidance into conformity with Financial 
Accounting Standards Board Accounting Standards Codification Topic 606, 
Revenue from Contracts with Customers. Upon adoption of Accounting 
Standards Codification Topic 606, registrants should no longer rely on 
the guidance in Securities Exchange Act Release No. 23507 and 
Accounting and Auditing Enforcement Release No. 108, In the Matter of 
Stewart Parness, which set forth the criteria to be met in order to 
recognize revenue when delivery has not occurred.

DATES: Effective: August 29, 2017.

FOR FURTHER INFORMATION CONTACT: Kevin L. Vaughn, Senior Associate 
Chief Accountant, or Joseph R. Epstein, Professional Accounting Fellow, 
Office of the Chief Accountant, at (202) 551-5300, U.S. Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549-6561. 
Inquiries about this interpretive release also can be directed to 
<a href="/cdn-cgi/l/email-protection#f49b9795b4879197da939b82"><span class="__cf_email__" data-cfemail="563935371625333578313920">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    In 1986, in Securities Exchange Act Release No. 23507 and 
Accounting and Auditing Enforcement Release No. 108, In the Matter of 
Stewart Parness (``AAER 108''), the Commission set forth criteria to be 
met in order to recognize revenue when delivery has not occurred 
(commonly referred to as ``bill-and-hold'').\1\ The Commission staff 
reiterated this guidance in Staff Accounting Bulletin (``SAB'') Topic 
13, Revenue Recognition. SAB Topic 13 expressed the staff's views on 
the basic principles of revenue recognition in then-existing generally 
accepted accounting principles and summarized in one location the 
existing guidance on revenue recognition to make that guidance more 
accessible to registrants and their auditors.
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    \1\ See In the Matter of Stewart Parness, AAER 108 (Aug. 5, 
1986).
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II. The Application of Generally Accepted Accounting Principles for 
Revenue Recognition Related to Bill-and-Hold Arrangements

    The Commission historically has recognized pronouncements of the 
Financial Accounting Standards Board (``FASB'') as authoritative in the 
absence of any contrary determination by the Commission.\2\ In 
Financial Reporting Release No. 70,\3\ the Commission stated its 
determination that the FASB and its parent organization, the Financial 
Accounting Foundation, satisfied the criteria in Section 19(b) of the 
Securities Act of 1933 \4\ and, accordingly, FASB's financial 
accounting and reporting standards are recognized as ``generally 
accepted'' for purposes of the federal

[[Page 41148]]

securities laws. As a result, registrants are required to comply with 
those standards in preparing financial statements filed with the 
Commission, unless the Commission provides otherwise.\5\
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    \2\ Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-01(a)(1). 
See Accounting Series Release (``ASR'') No. 150 (Dec. 20, 1973) and 
ASR No. 4 (Apr. 25, 1938).
    \3\ Policy Statement: Reaffirming the Status of the FASB as a 
Designated Private-Sector Standard Setter, Release Nos. 33-8221; 34-
47743; IC-26028; FR-70 (Apr. 25, 2003) (``FR-70''); 68 FR 23333 (May 
1, 2003).
    \4\ 15 U.S.C. 77s(b).
    \5\ See FR-70; Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-
01(a)(1).
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    The FASB has issued comprehensive revenue recognition guidance in 
Accounting Standards Codification (``ASC'') Topic 606, Revenues from 
Contracts with Customers (``ASC Topic 606''), which supersedes most 
previous revenue recognition guidance issued by the FASB. Under ASC 
Topic 606, the general criteria for revenue recognition includes 
identifying the contract(s) with a customer, identifying the 
performance obligations in the contract, determining the transaction 
price, allocating the transaction price to the performance obligations 
in the contract, and recognizing revenue when (or as) the entity 
satisfies a performance obligation by transferring a promised good or 
service to a customer.\6\ A good or service is transferred when (or as) 
the customer obtains control of that good or service, and ASC Topic 606 
sets forth indicators of when control has been transferred.\7\
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    \6\ See ASC paragraph 606-10-05-04.
    \7\ See ASC paragraphs 606-10-25-23 through 25-30.
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    ASC Topic 606 also provides specific guidance on contracts under 
which an entity bills a customer for a product but the entity retains 
physical possession of the product until it is transferred to the 
customer at a point in time in the future (i.e., a bill-and-hold 
arrangement).\8\ ASC Topic 606 acknowledges that, for some contracts, a 
customer may obtain control of a product even though that product 
remains in an entity's physical possession.\9\ In order to recognize 
revenue in a bill-and-hold arrangement, ASC Topic 606 requires 
consideration of the indicators of when control has been transferred 
and sets forth additional criteria to be met.\10\
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    \8\ See ASC paragraphs 606-10-55-81 through 55-84.
    \9\ See ASC paragraph 606-10-55-82.
    \10\ See ASC paragraph 606-10-55-83.
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III. Updated Commission Guidance

    In light of the FASB's issuance of ASC Topic 606, upon a 
registrant's adoption of ASC Topic 606, it should no longer refer to 
the guidance in AAER 108 related to recognizing revenue in a bill-and-
hold arrangement because ASC Topic 606 provides specific guidance on 
recognizing revenue for those arrangements.
    The updated Commission guidance set forth in this interpretation is 
applicable upon a registrant's adoption of ASC Topic 606 and applies to 
all arrangements for which revenue is recognized in accordance with ASC 
Topic 606. Prior to a registrant's adoption of ASC Topic 606, the 
guidance in Securities Exchange Act Release No. 23507 and AAER 108 is 
still applicable to all arrangements for which revenue is recognized.

List of Subjects in 17 CFR Parts 231, 241, and 271

    Accounting, Securities.

Amendments to the Code of Federal Regulations

    For the reasons set out in the preamble, the Commission is amending 
title 17, chapter II of the Code of Federal Regulations as set forth 
below:

PART 231--INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT OF 
1933 AND GENERAL RULES AND REGULATIONS THEREUNDER

0
1. Part 231 is amended by adding an entry for Release No. 33-10402 at 
the end of the table to read as follows:

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               Subject                       Release No.                  Date           Fed. Reg. vol. and page
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                                                  * * * * * * *
Commission Guidance Regarding Revenue  33-10402                 Aug. 18, 2017..........  [INSERT Federal
 Recognition for Bill-and-Hold                                                            Register CITATION].
 Arrangements.
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PART 241--INTERPRETATIVE RELEASES RELATING TO THE SECURITIES 
EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER

0
2. Part 241 is amended by adding an entry for Release No. 34-81428 at 
the end of the table to read as follows:

----------------------------------------------------------------------------------------------------------------
               Subject                       Release No.                  Date           Fed. Reg. vol. and page
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Commission Guidance Regarding Revenue  34-81428                 Aug. 18, 2017..........  [INSERT Federal
 Recognition for Bill-and-Hold                                                            Register CITATION].
 Arrangements.
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PART 271--INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT 
COMPANY ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER

0
3. Part 271 is amended by adding an entry for Release No. IC-32784 at 
the end of the table to read as follows:

[[Page 41149]]



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               Subject                       Release No.                  Date           Fed. Reg. vol. and page
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                                                  * * * * * * *
Commission Guidance Regarding Revenue  IC-32784                 Aug. 18, 2017..........  [INSERT Federal
 Recognition for Bill-and-Hold                                                            Register CITATION].
 Arrangements.
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    By the Commission.

    Dated: August 18, 2017.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-17913 Filed 8-28-17; 8:45 am]
BILLING CODE 8011-01-P


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