Revenue Recognition

Revenue is considered one of the most significant measures used nowadays in the financial world to assess the results and to achieve proper recognition of revenue of paramount importance. It also operates the success of most businesses, as it is a means of generating profits and increasing equity. Revenue recognition is an accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which revenue is recognized or accounted for. Generally, revenue is recognized only when a specific critical event has occurred and the amount of revenue is measurable. The FASB has accepted that current Generally Accepted Accounting Principles (GAAP) involve complex and disparate revenue recognition requirements for specific transaction and industries. As a result, different industries use different accounting methods for economically similar transactions. That is why the Financial Accounting Standards Board and the International Accounting Standards Board have issued a new standard on revenue recognition. Implementation of this new standard will result in significant changes in financial performance of the companies improving its financial reporting. The main principle of this standard is that entity should distinguish revenue in order to describe …show more content…
The implementation of a new revenue recognition standard will lead to changes in framework of transactions and agreements. As a result, many companies will need to elaborate new methods to rate and process revenue transactions. The new standard will have an impact on taxes: bringing changes in a tax accounting method; adjustments to deferred tax accounting; management will need to update policies and