Revenue Recognition Within the Iasb and Fasb

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Revenue Recognition within the IASB and FASB

Revenue Recognition within the IASB and FASB
Revenue is a critical number to any user of financial statements in determining an organization’s financial position and performance. Although this is the case, there are many differences between revenue recognition for U.S. GAAP (Generally Accepted Accounting Standards under the FASB) and IFRS (International Financial Reporting Standards under IASB). Along with these differences comes need for improvement in both reporting methods.
IFRS has fewer requirements for revenue recognition in comparison to U.S. GAAP, and is made up of two central revenue recognition standards: IAS 18 (revenue) and IAS 11 (construction contracts). These standards are said to be fairly difficult to apply and understand, and give little guidance on important topics for users. On the other hand, U.S. GAAP is made up of a very wide range of revenue recognition concepts and has countless requirements for specific transactions and specific industries. This makes is very difficult for users to apply these reporting standards and makes it even harder for users of these financial statements to determine the entity’s performance, as accounting for different transactions and industries can result in different numbers for economically similar situations. IFRS may not be perfect, but overall I believe it provides a simpler and more user-friendly set of accounting standards for revenue-recognition than U.S. GAAP.
IASB’s and FASB’s Revenue-Recognition Project
In 2002, the FASB (Financial Accounting Standards Board) and the IASB (International Accounting Standards Board) initiated a long-term project together to make improvements and join the revenue-accounting and recognition standards of U.S. GAAP and IFRS (Pounder, 2012, p. 38). This on-going project, often referred to as the “revenue recognition project”,…...

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