Revenue Recognition : Fasb And Fasb

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Revenue Recognition

Revenue Recognition – FASB.
When stakeholders and other interested parties evaluate possible future investments opportunities or financial lending to a corporation, they take a close look at a firm’s performance which is highly measured by revenue; a necessary tool in decision-making. The GAAP standards in the U.S. however are very different from standards by the IFRS (International Financial Reporting Standards), and both boards are in need of revision.
Due to the highly-detailed rules implemented by FASB in the area of revenue recognition, many transactions that are very similar often are not the same between different industries, resulting in multiple accounting methods for different industries. FASB has explained
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♣ Revenue contracts are only mentioned in disclosure of financial statements. There is very little information disclosed from various companies and organizations regarding these contracts.
♣ Large amount of rules governing revenue recognition.
♣ Items may not be categorized as separate revenue items in a contract when in actuality, for the customer, they are considered separate transactions.
How Does New Revenue Recognition Guidance Affect Not-for-Profit Organizations?
Under the current revenue recognition standards for non-profits, government contracts that call for reimbursement of expenses get recognized as expense is incurred. With the new standards, performance of the obligation set forth in the contract, transaction price and obligations of performance, in addition to timing and procedure, must be shown before the recognition of revenue.
What steps has the Internal Revenue Service (IRS) taken Regarding the New Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) Revenue Recognition Standards?
The IRS has concerns, as stated in Notice 2015-40, that the new revenue recognition will bring about many issues. One concern is, will the new methods of accounting be allowable under federal income tax regulation? A step taken by the IRS was to seek commentary and input from the public regarding how the new standards will work in respect to guidance, and the approximate scope
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