Response to the Financial Accounting Standards Board’s and the International Accounting Standards Board’s Joint Discussion Paper Entitled Preliminary Views on Revenue Recognition in Contracts with Customers (original) (raw)
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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
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.
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...
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...
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.
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.
Jurnal Dinamika Akuntansi dan Bisnis
In May 2014, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued long-awaited converged standard on revenue recognition, IFRS 15 and ASU 2014-09 (Topic 606) Revenue from Contracts with Customers, that sets out the principles for when revenue should be recognized and how it should be measured, together with related disclosures and will replace the all current revenue standards in IFRS and US.GAAP. Although the actual implementation is still in the future, now is the time for all preparers, auditors and users of financial statement to understanding of the new recognition and disclosure requirements and prepare to implement them, because the new provisions of IFRS 15 will impact in all entities in all industries, but the extent of the impact can vary significantly. This paper test the perception of Egyptian preparers and auditors on IFRS 15, we focus on the level of familiarity, standard clarity and ease of application across d...