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P & G Revenue Recognition Essay

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Introduction

The intent of FASB with ASC 605- Revenue Recognition, was to level the playing field for businesses by requiring the recognizing and reporting of revenue on a consistent basis by industry. This would attempt to discourage material misstatements in financial reporting for revenues. Properly recording revenue when earned is a critical process within any organization. Revenue being a key metrics used to analyze operations and award incentives to employees, to include CEO’s. Revenue impacts every area of a company and its accuracy is vital to continuing as a going concern. CEO compensation is a hot-button issue since the financial collapse of 2008. Investors, government watchdogs’, and general public, are scrutinizing this corporate expense. P&G Compensation & Leadership Board(C&LD) purpose is to oversee compensations packages of management and to ensure they are fair and equitable.
Revenue Recognition Discussion …show more content…

P&G records revenue when title, risk of loss and ownership transfers to the customer, which can take place at FOB– shipping point or FOB–destination. The point of transfer is determined at time of contract execution. “Net Sales” for P&G, is revenue net of allowances, discounts, promotions and coupons. This treatment is consistent with industry standards and GAAP, as revenues on the financial statements can be reported at net or gross. As with P&G, most companies report revenue at net and disclose the treatment under “Summary of Significant Accounting Policies” in the financial statements

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