[Federal Register Volume 82, Number 166 (Tuesday, August 29, 2017)]
[Rules and Regulations]
[Pages 41149-41151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17914]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 231, 241, and 271

[Release Nos. 33-10403; 34-81429; IC-32785]


Updates to Commission Guidance Regarding Accounting for Sales of 
Vaccines and Bioterror Countermeasures to the Federal Government for 
Placement Into the Pediatric Vaccine Stockpile or the Strategic 
National Stockpile

AGENCY: Securities and Exchange Commission.

ACTION: Interpretation.

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SUMMARY: The Securities and Exchange Commission is publishing this 
interpretive release to update previously issued guidance with respect 
to accounting for sales of vaccines and bioterror countermeasures to 
the Federal Government for placement into stockpiles related to the 
Vaccines for Children Program or the Strategic National Stockpile. This 
update is being provided to bring existing guidance into conformity 
with Financial Accounting Standards Board's Accounting Standards 
Codification Topic 606, Revenue from Contracts with Customers. This 
guidance is applicable upon a registrant's adoption of Accounting 
Standards Codification Topic 606 and is applicable to all arrangements 
for which revenue is recognized in accordance with Accounting Standards 
Codification Topic 606.

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 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Securities and Exchange Commission (``Commission'') continues 
to be committed, as stated in previously-issued guidance (the ``2005 
Release''),\1\ to addressing any unintended consequences of accounting 
requirements that could impair the nation's ability to create and 
maintain sufficient supplies of various vaccines and bioterror 
countermeasures (``enumerated vaccines''). The Commission issued the 
2005 Release to address questions about the timing of revenue 
recognition for vaccines placed into the Vaccines for Children Program 
and the Strategic National Stockpile. At the time of the 2005 Release, 
some expressed concerns that the application of generally accepted 
accounting principles may require revenue recognition to be delayed 
beyond the period in which the vaccine is placed in the stockpile, and 
may have an unintended consequence of causing some vaccine 
manufacturers to decline to participate in these critical stockpile 
programs. The Commission published the guidance in the 2005 Release to 
resolve the accounting questions. With the Financial Accounting 
Standards Board's (``FASB'') issuance of Accounting Standards 
Codification (``ASC'') Topic 606, Revenues from Contracts with 
Customers (``ASC Topic 606''),\2\ we are providing this updated 
guidance.
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    \1\ See Commission Guidance Regarding Accounting for Sales of 
Vaccines and Bioterror Countermeasures to the Federal Government for 
Placement into the Pediatric Vaccine Stockpile or the Strategic 
National Stockpile, Release No. 33-8642 (Dec. 5, 2005).
    \2\ The International Accounting Standards Board (IASB) has also 
issued IFRS 15, Revenue from Contracts with Customers (IFRS 15). The 
issuance of ASC Topic 606 and IFRS 15 completes the joint effort by 
the FASB and IASB that was undertaken with the intent of improving 
financial reporting by creating converged comprehensive revenue 
recognition guidance for U.S. GAAP and IFRS.
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    Government vaccine stockpile programs are unique in many respects. 
For example, the primary objective of purchasing the vaccines is not to 
take delivery for ultimate use but rather to be able to require 
immediate delivery on notice. An additional characteristic of vaccine 
stockpiles is the limited shelf life of the vaccines. For these and 
other reasons, the Commission continues to limit this guidance to the 
vaccines enumerated below.

II. The Application of Generally Accepted Accounting Principles for 
Revenue Recognition to Vaccine Stockpiles

    The Commission historically has recognized pronouncements of the 
FASB as authoritative in the absence of any contrary determination by 
the Commission.\3\ In Financial Reporting Release No. 70,\4\ 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 \5\ and, 
accordingly, FASB's financial accounting and reporting standards are 
recognized as ``generally accepted'' for purposes of the federal 
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.\6\
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    \3\ 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).
    \4\ 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).
    \5\ 15 U.S.C. 77s(b).
    \6\ See FR-70; Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-
01(a)(1).
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    Although no specific guidance has been published by the FASB 
related to revenue recognition for vaccine stockpiles, the FASB has 
issued comprehensive revenue recognition guidance in ASC Topic 606, 
which supersedes most previous revenue recognition guidance issued by 
the FASB.
    In response to the new, comprehensive revenue recognition model in 
ASC Topic 606, simultaneous with publication of this release, the 
Commission has issued an interpretation stating \7\ that upon the 
registrant's adoption of ASC Topic 606, such registrant should no 
longer rely on the guidance in Securities Exchange Act Release No. 
23507 and Accounting and

[[Page 41150]]

Auditing Enforcement Release No. 108, In the Matter of Stewart Parness 
(``AAER 108''),\8\ which set forth criteria to be met in order to 
recognize revenue when delivery has not occurred. The Commission staff 
had previously reiterated the guidance in AAER 108 in Staff Accounting 
Bulletin (``SAB'') Topic 13, Revenue Recognition, which the staff is 
modifying as a result of the FASB's issuance of ASC Topic 606.
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    \7\ Commission Guidance Regarding Revenue Recognition for Bill-
and-Hold Arrangements, Release No. 33-10402 (Aug. 18, 2017).
    \8\ See In the Matter of Stewart Parness, AAER 108 (Aug. 5, 
1986).
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    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.\9\ 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.\10\
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    \9\ See ASC paragraph 606-10-05-04.
    \10\ 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).\11\ 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.\12\ In order to recognize 
revenue in a bill-and-hold arrangement, Topic 606 requires 
consideration of the indicators of when control has been transferred 
and sets forth additional criteria to be met.\13\
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    \11\ See ASC paragraphs 606-10-55-81 through 55-84.
    \12\ See ASC paragraph 606-10-55-82.
    \13\ See ASC paragraph 606-10-55-83.
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III. Updated Commission Guidance

    The Commission believes vaccine manufacturers should recognize 
revenue and provide the disclosures required under ASC Topic 606 when 
vaccines are placed into Federal Governmental stockpile programs 
because control of the enumerated vaccines will have been transferred 
to the customer and the criteria to recognize revenue in a bill-and-
hold arrangement under ASC Topic 606 will have been met.
    The following are the enumerated vaccines subject to this release:
     Childhood disease vaccines;
     Influenza vaccines; and
     Other vaccines and countermeasures sold to the Federal 
Government for placement in the Strategic National Stockpile.
    Due to the uniqueness of the vaccine stockpile programs as 
discussed above, this interpretative guidance is not applicable to 
transactions other than the sales of enumerated vaccines by vaccine 
manufacturers.
    Prior to a registrant's adoption of ASC Topic 606, the guidance 
contained in the 2005 Release is still applicable to all arrangements 
for which revenue is recognized.

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

    Accounting, Diseases, Securities, Terrorism.

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. 33-10403 at 
the end of the table to read as follows:

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               Subject                       Release No.                  Date           Fed. Reg. Vol. and page
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Updates to Commission Guidance         33-10403                 Aug. 18, 2017..........  [INSERT Federal
 Regarding Accounting for Sales of                                                        Register CITATION].
 Vaccines and Bioterror
 Countermeasures to the Federal
 Government for Placement into the
 Pediatric Vaccine Stockpile or the
 Strategic National Stockpile.
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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. 34-81429 at 
the end of the table to read as follows:

----------------------------------------------------------------------------------------------------------------
               Subject                       Release No.                  Date           Fed. Reg. vol. and page
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Updates to Commission Guidance         34-81429                 Aug. 18, 2017..........  [INSERT Federal
 Regarding Accounting for Sales of                                                        Register CITATION].
 Vaccines and Bioterror
 Countermeasures to the Federal
 Government for Placement into the
 Pediatric Vaccine Stockpile or the
 Strategic National Stockpile.
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[[Page 41151]]

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-32785 at 
the end of the table to read as follows:

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               Subject                       Release No.                  Date           Fed. Reg. vol. and page
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Updates to Commission Guidance         IC-32785                 Aug. 18, 2017..........  [INSERT Federal
 Regarding Accounting for Sales of                                                        Register CITATION].
 Vaccines and Bioterror
 Countermeasures to the Federal
 Government for Placement into the
 Pediatric Vaccine Stockpile or the
 Strategic National Stockpile.
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    By the Commission.

    Dated: August 18, 2017.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-17914 Filed 8-28-17; 8:45 am]
BILLING CODE 8011-01-P