Accounting Standards Update 2014-09 Essay

1608 Words May 4th, 2015 7 Pages
Over the past few years, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working closely together to develop a new set of revenue recognition standards in an effort to merge the standards of FASB and IASB, lessen the amount of industry-specific differences in the standards, and make the standards more principles-based. Because revenue is very important to both internal and external users of financial statements when it comes to assessing the financial performance of an organization, it was vital for the boards to collaborate on creating a universal standard for recognizing revenue making comparability between companies that much easier. On May 28, 2014, a final version of …show more content…
2. Provide a more robust framework for addressing revenue issues. 3. Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. 4. Provide more useful information to users of financial statements through improved disclosure requirements. 5. Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer (FASB, 2014).”
According to FASB, the main principle of ASC 2014-09 is to “recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services (Klimek & Welsh, 2014).” In other words, revenue will now be recognized when control of the good and/or service is transferred to the customer. Under the “old” standard, companies instead recognized revenue only when the risks and benefits were transferred to the customer, not ownership. One of the reasons for making this change was to recognize revenue in a way that properly represents a contract, in which there is an exchange of performance obligations, which are contract-enforced promises to transfer goods or services to a customer, for compensation between the contractor and the customer. Details explaining whether revenue should be recognized either (1) at a period in time or (2) over

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