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STANDARDS TRACKER |
STANDARDS TRACKER
FASB proposed ASU: consideration payable to a customer under Topic 606
FASB wants platforms, retailers, and others to account for payments to end users and third parties the same way - as revenue reductions.
FASB issued a proposed ASU on Oct. 22, 2026, to address a gap in Topic 606, Revenue from Contracts with Customers. The current standard does not explicitly address when payments to parties outside the direct distribution chain - those that do not purchase the entity's goods or services either directly from the entity or indirectly through its customer - are consideration payable to a customer. That silence has produced inconsistent practice across companies facing economically similar arrangements.
BY THE NUMBERS
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See below EFFECTIVE |
2 SOURCES TRACKED |
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Oct 23 LAST UPDATED |
FASB ISSUER |
The proposal would apply to all entities that make these payments in connection with a revenue contract under Topic 606. No effective date has been stated. The comment period closes Nov. 23, 2026, per both the Journal of Accountancy and CPA Practice Advisor's reporting on the release. CPA Practice Advisor notes the proposal originated from a recommendation of FASB's Emerging Issues Task Force.
Under Topic 606, consideration payable to a customer is accounted for as a reduction of the transaction price - and therefore of revenue - unless the payment is in exchange for a distinct good or service. The proposed amendments would clarify that payments made on behalf of a customer, or to a customer of an entity's customer, fall into that reduction category when either the entity has explicitly promised to make the payment, or the customer has a reasonable expectation that the payment will be made because it is implicitly promised or represents an in-substance price concession, per CPA Practice Advisor.
Real-world examples from the proposed ASU, as cited by CPA Practice Advisor, include a platform providing credits, rebates, or discounts directly to end users to encourage purchases from sellers that are the platform's customers, and a retailer paying a third-party bank to enable its customer to obtain interest-free financing. Both would now be evaluated under the clarified framework. CPA Practice Advisor reports the proposed amendments would not otherwise affect existing guidance on whether consideration payable to a customer is in exchange for a distinct good or service.
The proposal is open for comment - not yet final. No transition method or effective date has been announced. The Journal of Accountancy notes FASB is also planning an update session for private companies and not-for-profits around the same period, though that session is separate from the comment process on this proposal.
WHAT TO DO IN THE CLOSE
| Identify all contracts where your entity makes payments to end users, third-party banks, or other parties outside your direct distribution chain. | |
| Assess whether those payments would qualify as consideration payable to a customer under the proposed two-condition test. | |
| Review revenue line items and transaction-price calculations that could be affected if those payments shift to revenue reductions. | |
| Submit comments to FASB by Nov. 23, 2026, particularly if existing practice would change materially under the proposed framework. | |
| Flag the proposal for your external auditors now; journal entries and disclosure language may need revision once the ASU is finalized. |
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QUESTIONS THIS ANSWERS
What payments does the FASB Topic 606 consideration payable proposal cover?
The proposal covers payments made on behalf of a customer, or to a customer of an entity's customer, in connection with a revenue contract under Topic 606. It does not change existing guidance on whether a payment is in exchange for a distinct good or service, per CPA Practice Advisor.
Who has to apply the proposed amendments?
The proposal would apply to all companies and other organizations that make these payments in connection with a revenue contract accounted for under Topic 606, per CPA Practice Advisor. No entity-size or industry carve-outs are described in the sources.
When is the comment deadline for the proposed ASU?
Stakeholders have until Nov. 23, 2026, to comment on the proposal, per the Journal of Accountancy and CPA Practice Advisor.
SOURCES
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Previously: FASB new project: participating interest guidance under ASC 860 (transfers and servicing)
A living page: it is re-read and updated as coverage arrives; last updated Friday October 23. Facts come from the linked sources; confirm against the issuer's own text before relying on it.
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