Revenue Recognition of Construction Industry

Introduction Revenue recognition in the construction industry is a complex area and the IASB and FASB are currently working on developing comprehensive new revenue recognition accounting standards. Before they announce new standards, our customers know best about current standards and development issues for revenue recognition. In this article, I will first explain how the construction industry's current revenue is recognized. Next, I will explain the process of developing a new standard.

Recognition of revenue Recognition of revenue depends on specific facts and circumstances, as well as different industry-specific accounting principles and practices, so the auditor is usually based on the auditor's understanding of the company and its environment, including revenue composition Create an audit procedure. Attributes and industry-specific considerations If the identified fraud risk includes incorrect revenue recognition, the auditor should also consider the following:

Until now, the source of revenue for the entire lifecycle of sales varies depending on the business model, so recognition of revenue between industries will vary widely. For example, according to SaaS reports, revenue (mainly regular subscription fee revenues) is significantly different from earnings reporting methods used for traditional one-time sales. ASC 606 and IFRS 15 were created to standardize and coordinate the way in which all companies recognize revenue irrespective of industry or region. The new standard is the result of long-term collaboration between the Financial Accounting Standards Council (FASB) and the International Accounting Standards Board (IASB).

The Revenue Recognition Guide helps mid-market companies to apply a new revenue recognition model to the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 "Contracts with Customers". ASC 606 provides a powerful framework for identifying revenue and uses US GAAP (legacy GAAP) to replace almost all existing revenue recognition guidelines, including industry-specific guidelines, with the effective date .