Revenue Recognition

Revenue Recognition

Introduction

The general accepted accounting principles, GAAP are the principles for the revenue recognition in the business while the IFRS, are the set of rules or the standards for the recognition of the revenue in a business.

It is very difficult to list all the differences between the US GAAP and IFRS that is related to the recognition of revenue. The reason is that the guidance on revenue recognition is importantly more extensive in GAAP than in IFRS as IFRS (Schiebel, 2007) deals with the second particular standard: IAS 18 Revenue and IAS 11 that is the construct ruction contract while the US GAAP provides the detailed rules and the outlines the few concepts for the revenue recognition in the different industries.

Discussion

The timing for the revenue recognition is different for different classes specially when the prices are concerned, as it is possible for revenue recognition that can be recorded earlier in IFRS than in GAAP when the prices are concerned, as the IFRS recognizes the revenue when the economic benefit is associated and the revenue can be measured reliably, which means that the revenue is the contingent revenue that can only be recognized when the two conditions are fulfilled, like when the amounts of revenue is not sure, while in the US GAAP recognition of revenue cannot be done until and unless the amount is set, which as an outcome the questionable amount of the revenue can be recognized earlier in IFRs than the US GAAP.

If the revenue is recognized for the economic benefits than there is the difference between the revenue as if the set amount ids only recognized in the revenue, while on the other hand the revenue is recognized for the economic benefit than the risk involved in the business might be, that there will; be modification in the profit and the loss account of the business, if the revenue is not recognized than net income will be the less, also in the balance sheet cash and other receivables that are being collected will not be recognized ultimately the financial firm will be at loss because the financial firm have to recognize the revenue when they are collected, but if the economic benefit is concerned with the recognition of the revenue than the it will conduct the risk for the business because it will have an impact on the net income and the balance sheet of the business and also the cash flow of the business and therefore (Jamal, 2008) the investor will be more likely to be invest in the firm with having the chance of maximum return but if the revenue is recognized when the economic benefit is concerned with that than the difference in the net income of the business will involve the number of the risk that is being concerned with the recognition of the revenue.

The principles affect the industries like the retail industries like under the IFRS, the non-cash rebates that are being usually treated as the revenue reduction on the other ...