The New Joint Revenue Recognition Principles

Revenue recognition accounting standard ensures the correct revenue is recorded for each period of the income statement, it was previously based on the realization principle - requires revenue to be recognized when the earning process is virtually complete and is certain to collectability. FASB & IASB developed a new revenue recognition standard, Revenue from Contracts with Customers,” on May 28, 2014, ASU No 2014-09. (RRPA Revenue Recognition and Profitability Analysis-1-LO1-5).

The following report is in response to your request for an authoritative answer regarding revenue recognition when a right of return exists. The authoritative literature that addresses the revenue recognition when right of return exists is the FASB codification. More specifically, the section regarding revenue recognition of products. This section discusses the necessary conditions for recognizing revenue when a right of return exists and the factors that may impair the ability to make a reasonable estimate of the amount of future returns. (FASB ASC 605-15-25)

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

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 documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:

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

during the remainder of the contract year. See the example provided in Appendix A for an

A joint convergence committee created the members of (FASB) and (IASB). (IASB) is recognized as an independent accounting standard-setting body that is similar to (FASB) that joins (GAAP), and is governed by the (IFRS) foundation. Due to this convergence, (AICPA) believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world, (American Institute of CPAs, 2016). Secondly, (AICPA) is dedicated to supplying the whole accounting profession with information, tools and IFRS.com for instance to assimilate as well as implement a new set of standards. As the (AICPA) supports continual convergence of reliable accounting standards between (IFRS) and (GAAP) the mission of completion between (IASB) and (FASB) is prolonged. (AICPA) will always support funding mechanisms of the body-making

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.

On May 2014, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) had jointly issue the converged standard, IFRS 15, on the Recognition of Revenue from Contracts with Customers. The new standard create a common revenue recognition standard for both IFRS and US GAAP, it clarify the principle for recognizing revenue, enable consistently application in regardless of transactions, industries or capitals

The principle of revenue recognition states that the revenue can be recognized by following any of the following 10 methods:

Revenue recognition has been viewed routinely as one of the most difficult finance and accounting processes to get right. It represents one of the highest risks of material error on financial statements, and it is one of the leading causes of restatements. Before May 2014, revenue recognition guidance in U.S.GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes result in different accounting for economically similar transactions. 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 when to

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

AASB 15 provides a revised framework for recognizing and measuring revenue. According to AASB Standard (2014), AASB 15 Revenue from Contracts with Customers has the main objective to establish principles applied to provide information on financial statements about the nature, amount, timing and uncertainty of revenue and cash flows that arises when a contract is made with a customer to all those who are involved.