Financial Accounting Standards Board ( Fasb ) Essay

Revenue recognition accounting standard ensures the correct revenue is recorded for each period of the income statement, it was previously based on the realization principle - requires revenue to be recognized when the earning process is virtually complete and is certain to collectability. FASB & IASB developed a new revenue recognition standard, Revenue from Contracts with Customers,” on May 28, 2014, ASU No 2014-09. (RRPA Revenue Recognition and Profitability Analysis-1-LO1-5).

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

In 2018 it will be mandatory that AASB111 and AASB108 are replaced by AASB15. This new standards main principle necessitates entities to recognise revenue to portray the transfer of goods or services to customers in amounts that mirror the payment, of which the company expects to be entitled. AASB15 also provides regulation for transactions that were not previously addressed thoroughly, such as service revenue and contract modifications. Essentially it presents a 5 step system of Identifying the contracts with the customer, identifying the separate performance obligations in the contract, determining the transaction price, allocating the transaction price to certain performance obligations and recognizing revenue when or as the entity fulfils performance obligations – This is demonstrated towards the end of the report with a

The major benefit of this proposal is that agreement exists that there is more objectivity in measuring and determining changes in assets and liabilities than there is in measuring and determining the completion of the earning process. After taking comment letters on the discussion paper of December 2008 and an initial exposure draft in June of 2010, the boards issued a revision of the proposal in “Proposed Accounting Standards Update (Revised), Revenue Recognition (Topic 605) – Revenue from Contracts with Customers: Revision of Exposure Draft Issued June 24, 2010.” The new document left the basis of the proposal the same and added implementation guidance and a tentative date for adoption. Recognizing revenue under the standard would be a five-step

The Report describes a proposal for the group of 20 of doctors with regard to the creating a hospital. Due to the 500,000 population of the city $100 million dollars would actually be a great start. Because the facility would be located 30 miles from the downtown area it would allow the facility to attract patients without being crowded. On the downside this affects its financial position and market condition because of distance. A lot of patients are not able to get to the doctor due to the high gas prices. Using various strategies, such as looking into ways to connect with public transportation to deal with this problem and gain

Since 2002, Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) have been working toward “convergence” of US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). They have made significant progress in efforts to converge critical accounting standards such as those dealing with revenue recognition, financial instruments and leases. Once these projects are complete, the "era" of convergence will be at an end. Nevertheless, the benefits for investors of eventually getting to consistently applied, high-quality, globally accepted accounting

Purpose of research. The purpose of research is to analyze and compare the revenue recognition under FASB and IFRS provisions. The research is built on other studies that focus on the revenue recognition model and converged standards. The value of this study cannot be overemphasized since the revenue is an essential metric of financial statements that provides a comprehensive knowledge to users of financial information. The revenue recognition framework is under the development and scrutiny since 2002.

The Company is planning to adopt International Financial Reporting Standards (IFRS) in the near future and should be made aware of the International Accounting Standards Board’s (IASB) relevant accounting guidelines. While FASB has extensive revenue recognition guidelines, IASB only has one, IAS 18. IASB’s revenue recognition guideline for the sales of goods [IAS 18.14] states that revenue

However, this Statement maintains the scope of Interpretation 46(R) with the previous additional entities treated as special qualifying entities for purposes. The concept of these entities was eliminated in Statement No. 166. Therefore, the statement No. 167 also superseded the risks of quantitative-based and calculation of rewards to determine which enterprise, if any, provided a financial interest that controls an entity variable interest because the expectation of an access of the basic qualitative will be more efficient to identify which company has a financial interest of controlling in an entity variable interest. However, this is the way the FASB admitted to upgrade the financial reporting standards. Other additional necessity is an additional review event when deciding whether a company is a variable entity interest when there are any occurring circumstances and changes in facts. For instinct, the owner of the equity investment at risk, as a group, lose the power from voting rights to direct the activities of the entity that some characteristic impacts the economic entity’s performance. There will also be ongoing assessments of whether an enterprise is the key beneficiary of a variable interest entity.

recognition requirements in U.S. GAAP are different from those in IFRSs and both are considered in need of improvement. U.S. GAAP comprises broad revenue recognition concepts and numerous industry or transaction-specific requirements that can result in different accounting for economically similar transactions. Although, IFRSs contain less guidance on revenue recognition, its two main standards IAS 18 Revenue and IAS 11 Construction Contracts can be difficult to understand and apply beyond simple transactions. Also, they lack guidance on important topics such as revenue recognition for multiple-element arrangements.

Another critical requirement for users of financial statements is information, this is addressed through the disclosure of certain principles, policies and procedures to facilitate decision making, which current standards don’t adequately address, hence the issuing of AASB 15. (AASB,2014) Accordingly, a new standard is required to rectify the inconsistencies of revenue recognition and address the lack of consistent and useful information.

The following research paper is about the new joint revenue recognition principles that were unveiled by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), which standardizes generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) on recognition of revenue in the United States. The new joint revenue recognition principle was created to increase the financial transparency and the comparability within the industries in the United States of America, and as well as the industries throughout the world. The companies in the United States currently use the GAAP standards and the rest of the world uses the IFRS. But each country

Before May 2014, FASB defines that revenues and gains generally are not recognized until it realized or realizable. Such as, when the sale has been completed or service has been provided, revenue can be realized. Besides broad standard, U.S.GAAP revenue recognition guidance has numerous particular revenue requirements for industries or transactions, which sometimes result in different numbers for economically similar transactions. To remove inconsistencies, in May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, to replace the existing rules and modifies the method that the majority of U.S. companies used. In addition, FASB issued ASU No. 2015-14, Revenue From

The introduction of the AASB 15 alters the existing accounting framework in regards to revenue recognition in contractual transactions. The new accounting standards require revenue to be recognised at the value that best represents the value that an entity would be entitled to, after it satisfying its contractual obligations. A 5-step model has been introduced to streamline the revenue reporting process.

Revenue recognition is currently one of the most complex areas of accounting, however it hasn’t always been this way. From relatively simple beginnings, the guidance for recognizing revenue has grown larger and more complex along with the business environment. One reason revenue recognition has needed frequent improvement is its vulnerability to fraud. It has been recorded that several frauds during the 1987-2007 time period were a result of an overstatements of revenue, typically at the end of an accounting period in an effort to boost earnings. This fact shows the importance of rigorous revenue recognition guidelines, while further demonstrating a need for the revenue recognition project. There was also a need to clarify the differences in