The national Financial Accounting Standards Board (FASB) and The International Accounting Standards Board (IASB) came together and jointly issued a newer revenue recognition standards. This will change the effects of the current revenue guided under US GAAP and IFRS. It will take not much of the time to be used as the date is set to have effects from 2017. All of the firms had to work under the rules and regulations set. There is enough of the time left to understand and work on the changes. On dated 28th May, 2014 the new revenue standards were issued for contracts with customers. It has the power to give limitations and new rules are to be followed by various industries. It also includes those industries which have their own policies …show more content…
• It also comprises of better types of information which is more useful for investors with all the requirements of disclosure. It will be more likely to be seen that the new revenue will be more affected towards financial entity statements and preparation of financial reports of business. Instead there also will be companies which will understand the new changes and act upon it. They will be able to work with the new standards which very much less time and working will be easier. While few of controls will acts just the opposite as they will notice as they have been working in old pattern. This will become more apprehending as to implement with the rules. As soon as an early papers will be produced it will play a major role as to understand the purpose and easy to manage new implementations. The board is also prepared two different types of standards as many see them as one single standardization policy (Damodaran, 2002). The rules and regulations of US GAAP and IFRS are seen to be similar but few of these are set to a bit of difference • The Board had provided US GAAP more description to the levels of confidence. This is required for assessing all the collectibles so that it becomes more identifiable in contracts with the customers. This process is much more lower in IFRS • The conditions of FASB needs much more of the disclosure rather than compared to IASB. • The conditions of IASB give it customers to have an early
As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.
In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our
Implementing GAAP and IFRS will reduce huge transition cost that may occur in the future. Due to this difference between GAAP and IFRS, the transition cost from GAAP to IFRS is very high. If a company wants to change accounting reporting method, it must report the current year, pervious year or years depend on the situation and the first year started to report financial statements using the new-implemented method (Kieso Et al., Chap. 5, ETB). It cost a lot for the company to do so.
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
The revenue recognition framework had significant differences under The Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS) provisions. The transformation of revenue recognition was necessary to provide the integrity to financial statements. Moreover, new revenue recognition standards should be applicable to all businesses (p50 A New World of Revenue Recognition).
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
The FASB process includes five steps to develop generally accepted accounting principles. The first step involves meeting and issuing a discussion memorandum. “A discussion memorandum is a document intended to encourage discussion and debate amongst accounting and financial professionals in regards to a current issue relating to the accounting industry” (“Discussion Memorandum”, n.d.). These are the ideas that will harm or benefit accountants. Next, they will obtain responses to this memorandum. After this is done FASB will create an exposure draft. Exposure drafts are basically an open blog about the new changes FASB is trying to implement. “The FASB issues a variety of different types of exposure documents to solicit input on its standards-setting
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.
After over a decade of extensive deliberation, the IASB and FASB officially released their joint revenue recognition standard to be applied under both GAAP and IFRS. The FASB and IASB which they have been in collaboration for a converged revenue recognition principle since 2008. The new revenue recognition standard represents a milestone in the convergence process, as it is the first fully integrated joint standard. The purpose of the new revenue recognition principle is to standardize across the board how companies should recognize revenue recorded in financial statements.
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.
The joint standards board analyzed IAS 18, Revenue, and IAS 11, construction contracts. Trying to go through financial statements that do not use the same standard may be time consuming for auditors, so IASB and FASB deciding to combine those standards and redefine how to record revenue under a new joint standard may be the better option. In 2009 the IASB announced the decision to issue a joint standard with the FASB on revenue recognition. For the past five years, the IASB and the FASB periodically announced updates to the standard previously issued. The businesses and industries that use this revenue recognition standard should constantly watch for updates to existing standards, along with issuance of additional conjoint standards by the FASB and IASB. After thoroughly evaluating existing differences between GAAP and IFRS, recommendations for future joint standards will be discussed.
Current requirements of IFRS and US GAAP are different and often lead the recognition of similar transaction different economically, thereby, make it difficult for users to understand and compare revenue. The IFRS revenue recognition is diversity in practice since it contained limited guidance for a range of significant topics, for example, accounting for contract with multiple elements should be accounted as one overall obligation (BDO, 2014). US GAAP in oppose, have many revenue recognition standards with very detail guidance (FASB, 2014). It contains about 100 separate documents and protocols about revenue recognition (Sylva. M, 2014), but conceptually it is inconsistence with each other, thereby, different judgments have been made for different standard and result in inconsistence revenue recognition outcomes.
Financial reports are used by banks, investors, or governmental agencies to determine the financial stability of an organization. Importantly, financial reports are used to set stock prices and determine the solvency of an organization. Therefore, FASB was created to ensure organizations report accurate financial information. Additionally, financial reports are created using the same format as outlined by GAAP by all organizations.
On November 18, 2002 the FASB and IASB came together at a meeting in Norwalk, Connecticut to start the wheels in motion for the purpose of establishing a new set of financial standards. The FASB and IASB are committed to create financial standards that will be accepted both domestically and internationally that are of high quality and compatible for financial reporting. At present more than a 100 countries already use the International Financial Reporting Standards. The U.S. at present has not accepted a changed in accounting procedures; therefore, this is going to be a major task for both the FASB and IASB to complete successfully this union. I do believe that the partnership between the FASB and IASB will achieve the goals of creating a common financial reporting set of standards that will be accepted by all.
From the beginning, the process of releasing the new SAB 101 that regulate Revenue Recognition was controversial. Revenue recognition differs between Generally Accepted Accounting Principles (GAAP) which is the method the United State (US) is using and International Financial Reporting Standards (IFRS) which is the method the rest of the world is using. Under GAAP, it is detailed and has specific requirements for revenue recognition transaction base on individual industries. Therefore, different industries use different accounting method for similar revenue recognition transactions which can be difficult to compare financial statements between different industries. The reason is revenue is one of the most important measures presents to the investors in order to assess a company’s performance and prospects. On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued new guidance on revenue recognition to improve and establish more