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FASB, IASB Plod Toward Convergence on Revenue

Colleen Cunningham | October 27, 2009

For an economy that isn’t seeing enough revenue these days, the United States certainly does have a lot of ways companies can try to recognize it.

Currently, U.S. Generally Accepted Accounting Principles and GAAPs’ related guidance have more than 180 rules for revenue recognition (including the ones that conflict with others). Contrast that with International Financial Reporting Standards, where the opposite is true: IFRS has almost no guidance for some transactions.

Both extremes cause diversity in practice. That’s alarming, because when you look at common reasons for restatements, revenue recognition is frequently the primary reason. Companies that have to comply with myriad, complex rules may make honest mistakes. Improper revenue recognition is also a nifty way to commit fraud. Clearly, clarification and simplification is needed.

In December 2008, both the U.S. Financial Accounting Standards Board and the International Accounting Standards Board...

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