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The boards’ objective is to improve the existing guidance in both IFRSs and US GAAP by developing a single revenue model that can be applied consistently regardless of industry. Applying the underlying principle proposed by the boards, a company would recognise revenue when it satisfies a performance obligation by transferring goods and services to a customer as contractually agreed. That principle is similar to many existing requirements and the boards expect that many transactions would remain unaffected by the proposals. However, clarifying that principle and applying it consistently to all contracts with customers would improve the comparability and understandability of revenue for users of financial statements.
The discussion paper explains the proposed model and its implications and seeks views from interested parties to assist the boards in further developing that model into a draft standard for both IFRSs and US GAAP.
Commenting on the discussion paper, Sir David Tweedie, chairman of the IASB, said:
We believe that a single revenue model, applied consistently across various industries and countries, would greatly improve comparability of a key number in the financial statements. We haven’t got all the answers yet, but we need to know whether we’re heading in the right direction. If you want to influence the outcome of the project, now is the time to get involved.
Robert Herz, chairman of the US FASB, said:
Revenue recognition guidance has become increasingly complex with scores of authoritative literature in US GAAP. The boards’ revenue recognition project aims to simplify existing guidance by providing clear principles for recognizing revenue across a variety of industries. This discussion paper is an important step toward achieving that aim.
The discussion paper is open for comment until 19 June 2009.
Preliminary Views on Revenue Recognition in Contracts with Customers is available on the ‘Open for Comment’ section on www.iasb.org from today. Subscribers may also view the document in the eIFRSs Website. Printed copies (ISBN 978-1-905590-95-7) will be sent to Comprehensive subscribers and will be available shortly, at £12 plus shipping, from the IASC Foundation Publications Department. Those wishing to subscribe should visit the online shop at www.iasb.org or contact:
IASC Foundation Publications Department,
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