Revenue Recognition: A Brave New World

53 Pages Posted: 19 Dec 2017 Last revised: 10 May 2018

See all articles by Elizabeth A. Gordon

Elizabeth A. Gordon

Temple University - Department of Accounting

Elaine Henry

Stevens Institute of Technology - School of Business

Hsiao-Tang Hsu

Texas A&M University - Corpus Christi

Date Written: May 9, 2018

Abstract

We examine the market reaction to the discussions and deliberations during the period 1998 to 2015 surrounding the new revenue recognition standard issued simultaneously by the FASB and IASB. We find that market reactions to events leading to the joint standard differ for US GAAP and IFRS firms. The reaction is a net negative reaction for US GAAP reporters but a net positive reaction for IFRS reporters. US GAAP (IFRS) firms in high litigation industries experience negative (less positive) market reactions to those in low risk industries. In certain high-impact industries in the U.S. including medical equipment and telecommunications, the market reaction is positive suggesting benefits in these industries. Further, the results for the most visible and significant events are consistent with those based on the full set of events. The evidence suggests that the new revenue recognition standard imposes net costs to the U.S. firms, except in those industries expected to benefit the most, while it provides net benefits to IFRS reporters.

Keywords: IFRS, US GAAP, Revenue Recognition, Financial Reporting

JEL Classification: D78, F02, M16, M41, G38

Suggested Citation

Gordon, Elizabeth A. and Henry, Elaine and Hsu, Hsiao-Tang, Revenue Recognition: A Brave New World (May 9, 2018). Stevens Institute of Technology School of Business Research Paper, Fox School of Business Research Paper No. 18-007, Available at SSRN: https://ssrn.com/abstract=3088041 or http://dx.doi.org/10.2139/ssrn.3088041

Elizabeth A. Gordon (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States
2152046422 (Phone)

Elaine Henry

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Hsiao-Tang Hsu

Texas A&M University - Corpus Christi ( email )

6300 Ocean Drive
Corpus Christi, TX 78412
United States

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