Revenue Recognition

Revenue Recognition

Introduction

The International Accounting Standards Board has published an exposure draft that consists of the proposed amendments to International Financial Reporting Standards (IFRSs) which is a part of an Annual Improvements project. This particular project provides an efficient procedure in order to handle all the matters related to IFRSs in the best possible way. These amendments must conform to the enhanced criteria for the Board's Annual Improvements process that received an approval by the Trustees in February 2011 which formed a part of the revision towards the Due Process Handbook for the IASB. The revised criteria went through a development phase in order to decide that matters having relation to the explanation or improvement of IFRSs must be addressed with the support of utilizing Annual Improvements process. This will eliminate the need for the creation of separate exposure draft for every issue. The year dates comprising of the two years representing a cycle have been included in the title in order to make it easier for distinguishing various proposals belonging to other cycles of the Annual Improvements project. The suggestions that have been put forward for consideration within the Annual Improvements process are considered and go through discussion in the IFRS Interpretations Committee and by the Board. These discussions usually take place during the Committee's and the Board's public meetings, which have a main, focus on the criteria for the annual improvements. Therefore, all the issues related to Revenue Recognition will be discussed in detail.

Importance of Accounting Standard Systems

The organizations established practice measures which suggest that financial accounting standards serve the purpose of systematically measuring economic activity in a uniform and consistent manner. Accounting standards are part of a body of rules and principles commonly referred to as Generally Accepted Accounting Principles (GAAP). GAAP, as promulgated by the Financial Accounting Standards Board (FASB), are developed using a conceptual framework called due process. The FASB uses a set of due process procedures to ensure that the interests of its constituents are considered in the development of accounting standards and other pronouncements. The researcher known as Miller et al. also indicated that one component of due process is the solicitation and collection of comment letters on selected FASB projects. Comment letters are requested by the FASB in an effort to better understand the opinions and potential issues of FASB's constituents when developing financial accounting standards. These comment letters are required as part of due process procedures at the FASB (Alan & Susan, 2007).

Multiple studies have been published dealing with aspects of due process, where one or more nonrandom financial accounting standards were selected and models mostly quantitative were used to explain the influence of comment letters on the development of financial accounting standards. The nonrandom selection and failure to compare with a control group increased the threat to external validity, limited generalizations to the tested standards and compromised the findings outside the group studied. Prior research has not been replicated using random selection ...