Financial Statements Regarding A Company 's Performance And Prospects

1273 Words Nov 19th, 2014 6 Pages
Final Exam Question 4 According to FASB webpage, revenue is a crucial number to users of financial statements in assessing a company’s performance and prospects. However, revenue recognition requirements in U.S. GAAP differ from those in IFRS, and both sets of requirements are considered to be in need of improvements. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would 1) remove inconsistencies and weaknesses in existing revenue recognition standards and practices; 2) provide a more robust framework for addressing revenue recognition issues; 3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; 4) require enhanced disclosures; and 5) clarify accounting for contract costs.
On June 24, 2010, the FASB and the IASB published for public comment an exposure draft, “Revenue from Contracts with Customers.” The core principle of the proposed standard on revenue recognition is that a business entity should recognize revenue for goods and services such that the amount reflects the consideration that the business entity receives, or expects to receive, in exchange for goods and services. Standard setters have identified five steps that should be used to apply the proposed standard: identify the contract(s) with a customer, identify the separate performance obligations in the contract,…
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