Lexis Nexus Complexus: Comparative Contract Law and International Accounting Collide in the IASB-FASB Revenue Recognition Exposure Draft
Kurt S. Schulzke
Kennesaw State University; Slappey & Sadd, LLC
University of Connecticut
Pier Luigi Marchini
University of Parma - Department of Economics
August 31, 2012
46 Vanderbilt Journal of Transnational Law 515 (2013)
U.S. and international accounting-standard setters plan to launch a new, global revenue accounting standard, Revenue from Contracts with Customers, in 2013. Poised at the nexus of comparative contract law and international accounting, the proposal’s contract-based revenue recognition model creates new legal risks and opportunities for accountants, lawyers, clients, and financial statement users. Despite its focus on legally enforceable contracts, the proposed standard was drafted without input from the legal community. This Article models the proposal’s complex contract-analysis process, demonstrating that its revenue outcomes may vary materially because of seemingly minor interjurisdictional differences in law applicable to “open-price” contracts; offers practice pointers for attorneys, accountants, and auditors; recommends changes to the proposal, including the substitution of self-enforcing Nash equilibria for legally enforceable contracts; and encourages more collaboration between the legal and accounting professions in the joint deployment of legal and accounting expertise for better value creation, value allocation, and risk mitigation.
Number of Pages in PDF File: 66
Keywords: comparative contract law, revenue recognition, proactive law, Nash equilibria, international accounting, IFRS, FASB Codification
JEL Classification: M41, K12, K22, K33
Date posted: September 1, 2012 ; Last revised: April 10, 2013
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