The New Accounting Staff Audit Practice Alert No Essay

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).

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 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

Two types of accounting systems exist. The US GAAP is more rule-based, where IFRS is more principle-based. US GAAP gives very detailed methods of accounting and specific guidance. However, there are exceptions along with rules, which add complexity. In the contrast, IFRS allows potential for different interpretations of similar transactions. Auditors and financial statement reporters can use professional judgment to provide estimates in the financial statements because they cannot rely on specific rules that articulate what is supposed to be done.

Revenue recognition is one of the major areas that a convergence of Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) unleashes its fiery wrath on US domestic and global businesses. GAAP are the accounting principles that United States domestic companies currently use. GAAP was made and is regulated by the Federal Accounting Standards Board, known as FASB, established in 1973. This is a discussion of GAAP and IFRS, and how GAAP regulations for revenue recognition compare to the principals of revenue recognition established by IFRS standard IAS 18. IFRS was established by the International Accounting Standards Board (IASB) to develop quality and transparent global accounting standards. The United States began working with the IASB and has been on course to update GAAP to recognize the same accounting principles and standards as IFRS since 2002, after signing the “Norwalk Agreement.” The merger was originally scheduled for commencement in 2009 but was postponed a couple of times, and it is now set to take effect December fifteenth of next year for US public businesses. Revenue recognition is an accounting principal that determines when income from selling goods, rendering of services, contracts resulting in interest, dividends or royalties can be measurable and will be recorded as revenue. Revenue is the amount of money a business brings in during its

A variety of parties are interested in and affected by the development of accounting standards. Various users of accounting information have discovered that the best way to impact the formulation of accounting standards is to attempt to influence the standard setters. The CAP, APB, and FASB have all come

As many know revenue is the amount of money that a company receives during a specific period/time. However revenue recognition is slightly different, it is an accounting principle under GAAP that determines the specific conditions of when revenue is recognized or accounted for. Since many believe that the standard was in need for improvement, on August 12, 2015 the FASB issued an Accounting Standards Update. The update based on the board’s decision decided that public organizations should apply the new revenue recognition to annual reports beginning after December 15, 2017. It is said that the new standard is major achievement for the Boards’ in improving this financial standard. The purpose of the new standard is to establish principles

On February 24, the SEC unanimously agreed to publish a statement of continued support for a single set of high-quality global accounting standards. The SEC acknowledged that IFRS is best positioned to be the global standard. Even without a set conversion timeline from the SEC, IFRS has been affecting

It is for this reason that the international benchmark requires financial reports to contain fundamental and enhancing qualitative characteristics, the affected being faithful representation, comparability and verifiability. The major reason IASB proposed changes with the current standard is because these characteristics were compromised.

This year 's preliminary results season has been something of a landmark. Last year was to be the last reporting period where listed companies presented their results according to UK generally accepted accounting principles (GAAP). After that, they would be required to use international financial reporting standards (IFRS) to prepare their consolidated financial statements for accounting periods commencing on or after 1st January 2005 (http://search.ft.com, 2004). The requirement to adopt IFRS applies only to those companies that are active direct participants in the capital market (i.e. those that have securities that are publicly traded on recognised stock markets). There are estimated to be about 7,000 such companies in the EU, of whom

The reason for the new guidelines is to establish the principles to report important information to users of financial statements about the nature, timing, and uncertainty of revenue (FASB). Some of the new guidelines are as follows: to remove inconsistencies and weakness in current revenue standards, provide a more stable procedure for revenue issues and errors, provide more information that can be used for financial statements all the way through disclosures, and simplify the preparation of financial statements. The FASB and IASB have is-sued these new standards in May of 2014, but did made the effective date for FASB December 15, 2017 and for IFRS to begin on January 1, 2018.

Although SEC has express their aim to drop IFRS and adopt IFRS by 2014, as United States based Partnership Company, operating only in United States, we are required to use GAAP. Generally Accepted Accounting Principles (GAAP) is defined as the standard guidelines of accounting rules for financial accounting and preparation of financial statements for private companies and the companies trading publicly in United States. In addition we are a small emerging firm and we have no international ambition yet. So we are not operating across jurisdiction. The frequent changes in GAAP may impact our

In mid 2014, the IASB proposed changes to revenue recognition under IFRS 15, which will come into effect from 1st January 2017 or earlier, if permitted. The main objective of the proposed changes was to improve on the previous revenue recognition requirements, which provided limited guidance, by providing enhancements to the consistency and quality of how revenue is reported and at the same time improve comparability in the financial statement of companies reporting under IFRS and US GAAP (Chartered Accountants 2013). The establishment of the principles that companies will apply will provide useful information to users of financial statements about the “nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer” (IFRS 15:1 2014).

In 2010 the Financial Accounting Standard (FASB) and the International Accounting Standard Board (IASB) began a joint project effort towards revenue recognition. The joint project effort of revenue recognition is considered to pass from United States GAAP to IFRS. The scholarly literature concerning how U.S. GAAP and IFRS recognize revenue mostly focuses on the conceptual differences in principles. Along with the actual FASB and the International Accounting Standards Board (IASB) concepts and statements, many scholars in accounting have tried to indicate the major fundamental differences in how each recognizes revenue. Along with these articles that attempt to show the fundamental, conceptual differences in revenue recognition principles, many articles also evaluate the current situation regarding the efforts by the FASB and the IASB to converge the two standards.