VIEWS: 6,043 PAGES: 4 CATEGORY: Business & Economics POSTED ON: 6/25/2010
Even though the FASB continues to work with the International Accounting Standards Board (IASB) to overhaul and converge the revenue provisions of US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS), entities that prepare financial statements in accordance with US GAAP have no choice but to "play by the rules" in the short term. Last month, the FASB changed the rules. Specifically, it issued two Accounting Standards Updates (ASU) relating to certain aspects of revenue accounting and reporting under US GAAP. US GAAP contains many rules designed to address complexities present in the kinds of revenue arrangements that are common today. The amended guidance arising from ASU Nos. 2009-13 and 2009-14 shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.
FINANCIAL REPORTING Bruce Pounder, CMA, CFM, Editor Revenue Recognition: New Answers to “How Much?” and “When?” The FASB recently made two significant changes to its revenue standards. For many entities, the changes will alter the amount of revenue accounting and report- Element Arrangements. and timing of reported revenue ing under U.S. GAAP. In this Vendors often enter into rev- as well as impose additional month’s column, I’ll provide a enue arrangements that involve disclosure requirements. high-level explanation of why the multiple deliverables. Under a answers to “How much?” and multiple-deliverable arrangement, “When?” are likely to change for a vendor may make multiple F rom a financial-statement preparer’s perspective, “How much?” and “When?” are the cen- many reporting entities and give other implications of the FASB’s actions. deliveries of the same product over time, may deliver different products at different times, or may tral questions of revenue recogni- perform the same or different ser- tion. Unfortunately, clear answers Multiple Elements vs. vices over different time frames, to those questions are often elu- Multiple Deliverables possibly in conjunction with the sive because of the complexities of U.S. GAAP contains many rules delivery of products under the modern commerce. Over time, designed to address complexities same arrangement. the U.S. Financial Accounting present in the kinds of revenue The key thing to understand is Standards Board (FASB) has arrangements that are common that just because an arrangement responded by promulgating a today. One example of such rules involves multiple deliverables, it plethora of highly prescriptive is that every revenue arrangement doesn’t necessarily involve multi- rules on revenue recognition. must be analyzed by the vendor ple elements (i.e., units of ac- Even though the FASB continues (or service provider) to determine counting) for purposes of revenue to work with the International
Pages to are hidden for
"Revenue Recognition: New Answers to "How Much?" and "When?""Please download to view full document