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Revenue Recognition on Fasb and Iasb Convergence Process

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Revenue Recognition on Fasb and Iasb Convergence Process
Revenue recognition on FASB and IASB convergence process

I. CONVERGENCE OF U.S. GAAP AND IFRS

Since 2002, Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) have been working toward “convergence” of US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). They have made significant progress in efforts to converge critical accounting standards such as those dealing with revenue recognition, financial instruments and leases. Once these projects are complete, the "era" of convergence will be at an end. Nevertheless, the benefits for investors of eventually getting to consistently applied, high-quality, globally accepted accounting standards are worth the price of some form of continued collaboration between the Boards. Although there have been difficulties when the Boards finalize their agendas for future projects, people believe that they should identify areas to continue working together, and that they should contributes to the highest quality standards with the least amount of differences.

II. REVENUE RECOGNITION ON PROPOSALS TIMLINE

FASB and IASB have completed several short-term convergence projects. They work on four high-priority convergence projects including revenue recognition, leasing, financial instruments and insurance contracts. In 2008, the Securities and Exchange Commission (SEC) issued its proposed “roadmap” to adoption of IFRS by U.S. companies. In February 2010, the SEC staff issued the “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.” In May 2011, the SEC published a paper suggesting condorsement a combination of convergence and endorsement as a possible alternative to requiring U.S. companies to adopt IFRS outright. Under this approach, FASB and IASB would continue their efforts to converge U.S. GAAP and IFRS. There are

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