Collaborative Arrangements: Main Provisions. Accounting, Finance Essay

Collaborative Arrangements: Main Provisions
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Evaluate and summarize the exposure draft’s main provisions in light of the conceptual framework (include qualitative characteristics of useful information).
The FASB has proposed various individual projects, and the Collaborative Arrangements (Topic 808) issued on April 26, 2018. These announcements help the accountants, auditors, and organizations prepare for significant changes in financial reporting (FASB, 2018). Collaborative Arrangements are joint operating activities when the parties formalize their business activities and operations without forming a separate entity to conduct their business (FASB, 2018). However, Topic 808 does not offer comprehensive guidance in collaborative arrangements, and various reporting entities have adopted different reporting practices. Topic 808 would be consistent with Topic 606 Revenue from Contracts with Customers, a revenue recognition standard where one or more of the parties are customers (Sparger, 2017). Clarification on the unit-of-account guidance and two qualifies as a customer provides insights on how to account for revenue in collaborative agreements.
Topic 808 does not give extensive details on the evaluation of collaborative arrangements, but it derives most of the guidelines from various accounting policies and guidelines. This results in disparities with regard to how transacting entity's activities that entail collaborative arrangement. Prior to the circulation of topic 606, revenue acquired through collaborative arrangement was based on: revenue collected as stated in topic 605 on revenue recognition, revenue determined based on analogy from topic 605 and revenue determined through exercising policy election (FASB, 2018). Therefore, the prospective amendments should improve comparison by allowing revenue recognition only from transactions in collaborative arrangements that are not directly linked to items sold to third parties as determined in topic 606.
The updated amendments would clarify the revenue transactions, which would be prepared, based on Topic 606 and standardize practices in recording the revenue from collaborative arrangements. This is especially when a transaction is in context of the unit of account where Topic 606 would be applied to record, measure, recognize and...