Lexis Nexus Complexus: Comparative Contract Law and International Accounting Collide in the IASB-FASB Revenue Recognition Exposure Draft

66 Pages Posted: 1 Sep 2012 Last revised: 10 Apr 2013

Kurt S. Schulzke

Kennesaw State University

Gerlinde Berger-Walliser

University of Connecticut

Pier Luigi Marchini

University of Parma - Department of Economics

Date Written: August 31, 2012

Abstract

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.

Keywords: comparative contract law, revenue recognition, proactive law, Nash equilibria, international accounting, IFRS, FASB Codification

JEL Classification: M41, K12, K22, K33

Suggested Citation

Schulzke, Kurt S. and Berger-Walliser, Gerlinde and Marchini, Pier Luigi, Lexis Nexus Complexus: Comparative Contract Law and International Accounting Collide in the IASB-FASB Revenue Recognition Exposure Draft (August 31, 2012). 46 Vanderbilt Journal of Transnational Law 515 (2013). Available at SSRN: https://ssrn.com/abstract=2139578 or http://dx.doi.org/10.2139/ssrn.2139578

Kurt S. Schulzke (Contact Author)

Kennesaw State University ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States
+1470-578-6379 (Phone)

HOME PAGE: http://schulzkelaw.com/

Gerlinde Berger-Walliser

University of Connecticut ( email )

Marketing Department
School of Business
Storrs, CT 06269-1041
United States

Pier Luigi Marchini

University of Parma - Department of Economics ( email )

Via Kennedy n.6
Parma, 43100
Italy
+39 0521 032389 (Phone)
+39 0521 032353 (Fax)

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