FASB Revenue Recognition Paper
Accounting Standards Update 2014-09
"Revenue from Contracts with Customers”
Jade Nelson
ACCT 4111-01
10/28/2014
Over the past few years, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working closely together to develop a new set of revenue recognition standards in an effort to merge the standards of FASB and IASB, lessen the amount of industry-specific differences in the standards, and make the standards more principles-based. Because revenue is very important to both internal and external users of financial statements when it comes to assessing the financial performance of an organization, it was vital for the boards to collaborate on creating a universal standard for recognizing revenue making comparability between companies that much easier. On May 28, 2014, a final version of these new standards were officially issued as a joint standard, for both FASB and IASB, on the recognition of revenue from contracts with customers, which is referred to as “ASC 2014-09” (Bramwell, 2014). Before ASC 2014-09, revenue recognition requirements for U.S. generally accepted accounting principles (GAAP) differed from the conditions set in the International Financial Reporting Standards (IFRS) in many ways. GAAP consisted of revenue recognition concepts that were too broad and rules that were sometimes industry-specific, which often resulted in organizations using different methods of accounting for transactions that were economically similar. While the requirements of GAAP were perceived as inconsistent, IFRS revenue recognition standards, more specifically IAS 18, Revenue, and IAS 11, Construction Contracts, lacked the appropriate and necessary detail (Bramwell, 2014). This imperfection made it nearly impossible to apply IFRS revenue recognition standards to complex matters. FASB and IASB began collaborating in an effort to make the principles of recognizing revenue more concise and to
"Revenue from Contracts with Customers”
Jade Nelson
ACCT 4111-01
10/28/2014
Over the past few years, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working closely together to develop a new set of revenue recognition standards in an effort to merge the standards of FASB and IASB, lessen the amount of industry-specific differences in the standards, and make the standards more principles-based. Because revenue is very important to both internal and external users of financial statements when it comes to assessing the financial performance of an organization, it was vital for the boards to collaborate on creating a universal standard for recognizing revenue making comparability between companies that much easier. On May 28, 2014, a final version of these new standards were officially issued as a joint standard, for both FASB and IASB, on the recognition of revenue from contracts with customers, which is referred to as “ASC 2014-09” (Bramwell, 2014). Before ASC 2014-09, revenue recognition requirements for U.S. generally accepted accounting principles (GAAP) differed from the conditions set in the International Financial Reporting Standards (IFRS) in many ways. GAAP consisted of revenue recognition concepts that were too broad and rules that were sometimes industry-specific, which often resulted in organizations using different methods of accounting for transactions that were economically similar. While the requirements of GAAP were perceived as inconsistent, IFRS revenue recognition standards, more specifically IAS 18, Revenue, and IAS 11, Construction Contracts, lacked the appropriate and necessary detail (Bramwell, 2014). This imperfection made it nearly impossible to apply IFRS revenue recognition standards to complex matters. FASB and IASB began collaborating in an effort to make the principles of recognizing revenue more concise and to
Cited: Bramwell, J. (2014, May 28). FASB, IASB Unveil Final Standard on Revenue Recognition. Retrieved from Accounting Web: http://www.accountingweb.com/article/fasb-iasb-unveil-final-standard-revenue-recognition/223413 FASB. (2014, May 28). Accounting Standards Updates - 2014. Retrieved from Financial Accounting Standards Board: https://asc.fasb.org/asccontent&trid=49115764#51575860 Klimek, C., & Welsh, C. (2014, May 28). IASB AND FASB ISSUE CONVERGED STANDARD ON REVENUE RECOGNITION. Retrieved from Financial Accounting Standards Board: http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FNewsPage&cid=1176164075286 Sabates, M. (2014, June 19). FASB Revenue Recognition Exposure Draft Becomes ASC 2014-09. Retrieved from Eisneramper Accountants & Advisors: http://www.eisneramper.com/fasb-revenue-recognition-asc-2014-09.aspx Trainer, D. (2014, June 2). FASB Changes Standard For Revenue Recognition . Retrieved from Seeking Aplha: http://seekingalpha.com/article/2248463-fasb-changes-standard-for-revenue-recognition?page=2