Fasb Revenue Recognition Standards Essay

The Financial Accounting Standards Board of the United States and the International Accounting Standards Board began the process with the adoption of the Norwalk Agreement of with the ambitious goal of implementing a single set of internationally accepted accounting principles by 2015. The IASB and the FASB came into the convergence project on revenue recognition from vastly different starting points. Both bodies came into the project with two main criteria for revenue recognition; however, this is where the similarities cease. IASB’s standards and framework provided that revenue would be recognized when 1) it is probable that any future economic benefit associated with the item will flow to or from the enterprise and 2) the item’s cost or value can be measured

IASB revenue recognition standards entering the convergence project consisted of two standards, IAS 18 and IAS 11. IAS 18 concerns itself with revenues including sale of goods, services, interest, royalties and dividends. IAS 11 focuses on construction contracts. As with all IASB standards, these standard provide principles based guidance without specific guidance at the transaction level. The standards of U.S. GAAP, provided by FASB, on the other hand consist of a set of over one hundred revenue related guidance of specific rules on an industry and transaction level; however, much of the general guidance is provided by Statement of Financial Accounting Concepts No. 5, a non-authoritative source of U.S. GAAP. The IASB and FASB are poised to adopt a joint standard on revenue recognition. This new world standard would take an asset-liability approach, such as that of pre-convergence IFRS, while containing more specific guidance than IFRS users are accustomed to seeing, taking a cue from the GAAP standards of the United States. Under the new standard, preparers would recognize revenue based on the contracts that they hold with