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Revenue is one of the most important financial statement measures to both preparers and users of financial statements. It is used to measure and assess aspects of a reporting entity's past financial performance, future prospects, and financial health. Revenue recognition is therefore one of the accounting topics most scrutinized by investors and regulators. Despite its significance and the increasing globalization of the world's financial markets, revenue recognition requirements prior to issuance of new guidance in 2014 differed in US generally accepted accounting principles (“US GAAP”) from those in International Financial Reporting Standards (“IFRS”), at times resulting in different accounting for similar transactions.
The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, the “boards”) jointly developed a standard containing comprehensive principles for recognizing revenue. As a result, the FASB issued ASC 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs—Contracts with Customers (collectively, the “revenue standard”), and the IASB issued IFRS 15, Revenue from Contracts with Customers, in May 2014 along with consequential amendments to existing standards. With the exception of a few discrete areas, the revenue standards are converged, eliminating most previous differences between US GAAP and IFRS in accounting for revenue from contracts with customers.
The boards subsequently issued multiple amendments to the new revenue standards as a result of feedback from stakeholders, primarily related to:
  • Deferral of the effective date of the revenue standard
  • Collectibility (see RR 2.6.1.5)
  • Identification of performance obligations (see RR 3.3)
  • Noncash consideration (see RR 4.5)
  • Licenses of intellectual property (see RR 9)
  • Principal versus agent guidance (see RR 10)
  • Practical expedients at transition
The amendments made by the FASB and IASB are not identical. For certain of the amendments, the financial reporting outcomes will be similar despite the use of different wording in ASC 606 and IFRS 15. However, there may be instances where differences in the guidance result in different conclusions under US GAAP and IFRS. Refer to SD 3.1 through SD 3.11 for further discussion of similarities and differences between the US GAAP and IFRS revenue standards.
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