New Approaches to Revenue Recognition and Common Sense

Abstract:     
The paper outlines basic features of revenue recognition practice under IFRS and US GAAP. The revenues usually represent the greatest single item reported in the financial statements. The current guidance on revenue recognition suffers from some weaknesses and inconsistencies. Finding the solution to these problems is a subject of joint IASB’s and FASB’s Revenue Recognition Project. The main aim of Revenue Recognition Project is to remove inconsistency and to create a comprehensive standard on revenue recognition that would apply to all possible revenue-generating transactions. Unfortunately, there exist some conflicts regarding the measurement of revenue. The advantages and disadvantages of fair value and allocated customer consideration amount model are analysed from the point of users’ information need usefulness. Background for this evaluation is derived from the empirical experiment.

Number of Pages in PDF File: 18

Keywords: IASB, FASB, IFRIC 13, Revenue Recognition Project, Allocated consideration amount model, Fair value model

JEL Classification: M41, M44

working papers series