Comment on the IASB Discussion Paper "Preliminary Views on Revenue Recognition in Contracts with Customers (original) (raw)
Related papers
Accounting Horizons, 2010
SYNOPSIS: The FASB and the IASB recently issued a joint discussion paper entitled, Preliminary Views on Revenue Recognition in Contracts with Customers. The boards requested comments on whether their proposed model for revenue recognition would improve the usefulness of the financial statement information for financial decision makers. This paper summarizes the AAA’s Financial Accounting Standards Committee’s responses to several of the boards’ specific questions. We support the boards’ proposed comprehensive revenue recognition standard based on the following options: (1) the customer consideration approach (based on initial contract price measurement); (2) no recognition of revenue at contract inception (by assigning the initial contract price to performance obligations); and (3) allocation of the transaction price to multiple performance obligations based on the relative stand-alone prices of each performance obligation. We also recommend that the boards carefully consider the fo...
Revenue Recognition Paradox: A Review of IAS 18 and IFRS 15
Social Science Research Network, 2016
The primary purpose of venturing into business is to make profit, this motive, however, have been criticised widely. The concept of income is crucial to the entity's financial performance, and is half of determining an organisation's profitability and sustainability. The treatment of "revenue" is particularly important when recognising income; revenue being income that is derived from an organisation's everyday operating activities. The objective of this paper is to review the provisions of the International Accounting Standards (IAS) 18 and International Financial Reporting Standards IFRS 15 with respect to revenue recognition. The basic foundation of the principles of how to deal with income, how to recognise revenue and other forms of income in the financial statements, the basis of IAS 18 to help the transition when IFRS 15 replaces it, and how to account for and disclose provisions of grants by government and other forms of government assistance were reviewed in this paper by adopting contents analysis methodology. The paper revealed the importance of IFRS and recommend that the users and preparers of financial statement should start in earnest, the training and understanding of IFRS 15 in readiness for its effective date January 1, 2017.
The Value Relevance of Revenue Recognition under International Financial Reporting Standards
2016
This study examines if there has a major change in the value relevance of revenue recognition components since the adoption of International Financial Reporting Standards 15 in the United States. The research problem addressed the lack of understanding of the value relevance of revenue recognition under IFRS and its application to impact for the telecommunication industry. Our results show that the public firms revenue recognition are value relevant under United States of Generally Accepted Accounting Principles (US GAAP) and remain so after the adoption of IFRS. Also, for revenue recognition after IFRS, along with an increase in the value relevance in the future. These results are consistent with the proportion that revenue recognition plays a reinforcing role that complements the more complex IFRS accounts. Consequently, if the International Accounting Standards (IASB) were to mandate revenue recognition, it would, in all likelihood, provide users of accounts with a valuable incre...
Comment on IASB/FASB 2011 ED on Revenues from Contracts with Customers
SSRN Electronic Journal, 2012
This document was prepared by the main authors, having received comments and suggestions from other members of the Committee. We mutually agree to sign a document when we consider it a valuable contribution to the assessment and understanding of the accounting issue (and proposed standard) under consideration. We thank Roshan Ajward for his valuable research assistance. Usual disclaimer applies. OVERVIEW The Exposure Draft ED/2011/6 on "Revenues from Contracts with Customers" (henceforth the ED) was jointly issued in November 2011 by the IASB and the FASB (henceforth the Boards). It plans to replace the current accounting standards for revenue recognition, respectively ASC Topic 605 (FASB) and related guidance, IAS 18, Revenue, and IAS 11, Construction Contracts (IASB). The Boards claim that the ED will improve financial reporting by creating a comprehensive revenue recognition standard that clarifies the principles for recognizing revenue and that can be applied consistently across various transactions, companies, industries and capital markets. If adopted, it is claimed that the standard would improve comparability, simplify the preparation, reduce the need for interpretative guidance
2015
Revenue is a crucial number to users of financial statements in assessing an entity’s financial performance and position. In May 2014, the IASB and FASB published a new joint standard (IFRS 15 vs. ASC 606) on revenue recognition which replaces most of the detailed guidance on revenue recognition that currently exists under US GAAP and IFRS. The new rules will apply to all entities that enter into contracts with customers. Coming up with a joint standard about recognizing revenue is a major achievement for the standard setters, but for corporate world the real work is fast approaching. According to first introduction paragraph of the standard IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Adoption of the joint standard on revenue recognition will represent a major advancement toward the ultimate goal of creatin...
Financial Reporting Topic 606: Revenue from Contracts with Customers
Topic 606 fundamentally supports SFAC No. 5 and 6 by forcing the recognition of revenue into the terms and obligations of a contract. It was also identified how Topic 606 generally improves on the objectives of SFAC No. 8 through relevance, materiality, and faithful presentation of financial reporting; which was a key objective of the principles-based standard. While considering these concepts, a theme was addressed throughout the paper that the due process played significant role in determining how the FASB structured their Accounting Standard Update. As a result, the FASB was pushed to allow for greater transaction-specific guidance within the principles-based framework; such as the example of licensing intellectual property. This is concerning under Miller’s current financial reporting paradigm, which emphasizes management’s incentive to manipulate earnings.
Universal Journal of Accounting and Finance, 2021
This study examined the post-implementation impact of IFRS 15 from the Nigerian perspective and challenges associated with the adoption. Four listed companies operating in IFRS 15 key impacted firms in Nigeria which accounts for 82% of total market capitalization as of April 2021 were selected. The data extracted were analyzed with the aid of tables, charts, ratios, percentages and content analysis. The study revealed that listed firms in Nigeria aligned with the need to adopt and fully implement IFRS 15 in their financial reporting in response to regulatory pressure and increased internationalization of their operations. The study, therefore, concluded that adoption and implementation of IFRS 15 had a positive effect on accounting numbers of listed firms in Nigeria. The study identified the proper identification and treatment of royalties, income taxes, proper delineation of revenues from contractual fees, the need for persistent contract modifications, capitalization of contract costs, and collectability issues, as key challenges of IFRS 15 implementation. The study recommended that the Board and Management of companies operating in the IFRS 15 impacted industries should always provide greater clarity on the basis used for arriving at the significant judgment calls they make. Also, the Financial Reporting Council and external auditors need to develop workable methodologies to monitor and tighten compliance with both quantitative and qualitative IFRS 15 disclosure requirements.
Particularts Regarding the Accounting Recognition of Revenue – the Case of Mobile Operators
Risk in Contemporary Economy, 2015
For the current economy, the sector of telecommunications which includes mobile telephony is one of the most important worldwide. World leaders of this sector are among the companies present in Romania, in terms of income and as financial performance. The range of services offered by mobile operators diversified and greatly increased in recent years, so that there are a wide variety of business models, which are subject to different policies. Experts in the field have hoped that the adoption of IFRS will help increase clarity in the sector, but the results so far are uncertain. The overall objective of this paper focuses on the analysis of the telecommunications industry accounting practices, focusing on specific issues of the mobile market. To this end we intend to analyze aspects of the history and evolution of mobile telephony market, national and international accounting regulations applied to the mobile operators, and evaluating accounting practices applied in the mobile teleph...
CONSIDERATIONS ON THE FAIR VALUE OF REVENUES RECOGNIZED IN FINANCIAL STATEMENTS
2009
This paper approaches a frequently discussed subject in the context of the current global economic crisis, namely the fair value. The accounting concept, which implies that entitiesin a different degree from one accounting system to anothershould recognize assets and liabilities at market values and often in the profit and loss account, has been accused of exacerbating the dramatic decrease in value of tangible and financial assets. The transparency ensured by fair value and its credibility are subject to polemics. In our opinion fair value increases the quality of accounting information, if it is correctly determined, disclosed and controlled. After a theoretical and normative presentation of the concept, we herein supply a solution for establishing fair value according to the international accounting regulations. The paper focuses on the issue of revenues and explains the fact that their corresponding fair value is determined through the discounted value. Using demonstrative case studies, it develops punctual methods for establishing discount rates and present values specific to revenues.