Revenue Recognition

Every time a product is sold, the seller receives revenue and reports. However, in the real world, such sales transactions are not so easy, and the principle of revenue recognition is the most problematic principle for accountants. Now, the sales process has become very complicated. Many problems and procedures are involved. Customers can choose to pay immediately upon sale or choose to pay in installments as agreed in the sales contract.

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 .

In May 2014, the FASB issued guidance on ASC 606 "Revenue Recognition - Customer Contract Revenue", which revised guidance on former ASC 605 "Revenue Recognition". The central principle of this standard is to recognize revenue when promised goods or services are transferred to customers. Amounts reflect the expected price received for those goods or services. This standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The company plans to adopt the criteria that came into effect on January 1, 2018.

The subject of this study was 'recognition of income based on US accounting standards and international financial reporting standards'. Revenue is the largest item in the financial statements and the problem of revenue recognition is the most important and difficult problem faced by standard setters and accountants. The revenue recognition requirement of US GAAP is different from the revenue recognition requirement of IFRS, both of which are thought to need improvement. US GAAP includes a wide range of revenue recognition concepts and a number of industry or transaction specific requirements that may result in different accounting for economically similar transactions. Although IFRS does not have much guidance on revenue recognition, the two main criteria, revenue of IAS 18 and construction contract of IAS 11, are difficult to understand and may be difficult to apply to simple transactions. In addition, there is no guidance on important topics such as revenue recognition of multi-factor contracts.