The Highly Awaited Changes to the Rules of Recognizing Revenue In 2014 FASB made a much-needed revision of the revenue recognition standard that was implemented at the end of December 2017. Where before there was mass of uncoordinated standards, along with gaps in information, they have now implemented a streamlined method on when to recognize revenue, along with the amount that should be recorded. So, what is the new revenue recognition standard? According to Scanlon M, Titera M, & Haskell M. (2017), “The core principle of the new Revenue Recognition Standard is that the recognition of revenue should depict accurately the transfer of goods or services to customers in amounts corresponding to the consideration that is expected in exchange” (p. 1). This means that, instead of waiting to record revenue till all aspects of the transaction or contract are completed, a company can record the revenue over the period of time it takes to conclude the process. …show more content…
Step one is to recognize that there is a legal contract set in place. The second step is to identify the obligations that are encompassed in the agreement. Thirdly, the company determines the amount of money they are entitled to receive for their services. Using the information established in the previous two steps, the transaction price is divided up between the contractual obligations, therefore, completing the fourth step. Lastly, the company will record revenue based on the length of time that will be necessary to complete the contract. Thus, completing the revenue recognition