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Inherent Difference Between US GAAP and IFRS on Revenue Recognition
Finance & Accounting
Pages 5 (1255 words)
Inherent Difference between US GAAP and IFRS on Revenue Recognition Name Instructor Task Date Introduction Revenue recognition is a single largest recurring financial statement item for most firms and a significant determinant of operating profitability. According to Stickney, Weil and Schipper (2009), revenue represents inflows of assets from transactions with customers.
In case either requirement fails, the seller must defer revenue recognition, and accounting guidance provides special procedures for single arrangements that contains multiple deliverables and for long-term contracts (Gill, 2007). US GAAP on Revenue Recognition A firm’s gross accounts receivable reflects the amounts customers have promised to pay, and balance sheet displays these receivables net of estimated uncollectible accounts (Gill, 2007). When the seller decides that receivables have become uncollectible, it writes off the receivable because of their significant for analyzing liquidity and profitability; thus, accounts receivable are an input to several ratios used by financial analysis. Therefore, revenue recognition under the GAAP state that the seller recognizes revenue only when the transaction meets the following conditions: Stickney, Weil and Schipper (2009) indicate that the seller is purposed to earn recognized revenue, meaning that the seller has substantially accomplished what he or she has promised the customer. ...
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