The Issues Facing The Accounting World

2354 Words Dec 17th, 2014 10 Pages
Two of the most contentious issues currently facing the accounting world are how to report revenue received from contracts and how to report income tax expenses. Both these issues have been at the centre of much criticism in recent years and this has led to current standards being reviewed and new standards being put in place with the aim to give a more accurate picture of a company’s performance in a given time period.
Revenue recognition is an area that concerns managers, regulators and auditors. For managers, selecting the wrong accounting method or one that may be challenged can damage reputation and credibility. Those possibilities have been becoming more real, given revenue recognition and classification decisions are a largely subjective matter. Thus, IFRS 15 ‘Revenue from Contracts’ has been devised to help combat this issue. It states that for all contracts with customers, revenue will be recognised when control of the promised good or service is transferred to customer, and not when risks and rewards pass as was previously the case.
There are a number of reasons why IFRS 15 was created. One of the main reasons was international convergence of standards between IFRS and GAAP. By issuing this new standard, users of financial statements will benefit from “improved comparability within industries, across industries and across capital markets” (ICAS), and so allow a better understanding of a company’s overall performance. It will also reduce the costs of complying with…

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