Alert: ASPE 3400 Revenue – Amendments

Category: ASPE

Alert: ASPE 3400 Revenue – Amendments

In December 2019, the Accounting Standards Board (AcSB) issued amendments to ASPE 3400 Revenue. This Section has been amended to provide additional guidance on the application of requirements in this Section related to:

  • Identifying units of account;
  • Multiple-element arrangements;
  • The percentage of completion method;
  • Reporting revenue gross or net;
  • Bill and hold arrangements; and
  • Upfront non-refundable fees or payments.

The amendments apply to Not-for-Profit Organizations where relevant.

Identifying Units of Account

  • The amended standard provides guidance on how to determine whether an arrangement consists of a group of contracts or a single contract and identifying the units of account in an arrangement.

Multiple-Element Arrangements

The amended standard provides guidance on allocating consideration in multiple-element arrangements to separate units of account on a relative stand-alone selling price basis and methods for estimating the stand-alone selling price when it is not directly observable.

The Percentage of Completion Method

  • Additional guidance is provided for revenue recognition under the percentage of completion method, including the following;
    • Determining the degree of completion using either input or output measures;
    • Treatment of changes or revisions in estimates;
    • Alternative approaches that may be used for computing income earned for a period;
    • Determining which contract costs to include when assessing the degree of completion; and
    • Recognition of expected losses.

Reporting Revenue Gross or Net

  • The amended standard provides indicators to consider when determining whether to report revenue gross or net. Examples include but are not limited to:
    • Indicators of gross:
      • An enterprise was the primary obligation to the customer; or
      • An enterprise has general inventory risk.
    • Indicators of net:
      • The supplier has the primary obligation to the customer; or
      • The amount earned is fixed.

Bill and Hold Arrangements

  • The amended standard provides criteria to use in determining when to recognize revenue for a bill and hold arrangement. An overview of the criteria, all of which must be met, is as follows:
    • The risks of ownership have passed to the buyer;
    • The customer has made a fixed commitment to purchase goods;
    • The buyer must request that the transaction be on a bill and hold basis and must have a substantial business purpose for ordering goods on a bill and hold basis;
    • There must be a schedule for delivery that is reasonable and consistent with the buyer’s business purpose;
    • The seller must not have retained any specific performance obligations;
    • The ordered goods must have been segregated from the seller’s inventory and must not be subject to being used to fill other orders; and
    • The product must be complete and ready for shipment.

Upfront Non-Refundable Fees or Payments

  • The amended standard provides guidance on determining when to recognize revenue for upfront non-refundable fees or payments.
  • Revenue is deferred when the upfront fee is in exchange for products delivered or services performed that have no utility to the buyer separate and independent of the enterprise’s performance of the other elements of the arrangement.

Presentation and Disclosure

  • The recognition and presentation requirements within Section 3400 have not changed, however, where more detailed guidance has been provided, application of these additional considerations may result in changes to an enterprise’s policies for revenue recognition or presentation.
  • There are additional disclosure requirements for contracts in progress at the end of the reporting period accounted for using the percentage of completion method. Enterprises will be required to disclose:
    • The method used to measure the degree of completion;
    • The aggregate amount of costs incurred and profits (less losses) recognized to date;
    • The aggregate amount of advances received and holdbacks withheld; and
    • Any uncertainties affecting the measurement of the degree of completion.


  • The new standard should be applied retrospectively with the following relief:
    • The cumulative effect on applying the amendments is recorded as an adjustment in opening retained earnings of the respective period.
    • An enterprise may choose to apply the amendments to multiple-element arrangements and contracts accounted for using the percentage of completion method at the beginning of the earliest period or at the beginning of the fiscal year in which the amendments are first applied.
    • Retrospective adjustments are not required for long-term contracts accounted for using the percentage of completion method that were completed during the final year in which the amendments are first applied or during the immediately preceding fiscal year.
    • Retrospective adjustments are not required for multiple-element arrangements when all deliverables have been fulfilled during the fiscal year in which the amendments are first applied or during the immediately preceding fiscal year.

The effective date of the new standard is for fiscal years beginning on or after January 1, 2022, with earlier application permitted.

This communication contains a general overview of the topic and is current as of May 15, 2020. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2020. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.