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Revenue Recognition: International Accounting (5104)

BNA Tax and Accounting Portfolio 5104-2nd, Revenue Recognition: International Accounting Standards, discusses revenue recognition principles under International Financial Reporting Standards (IFRS).

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DESCRIPTION

BNA Tax and Accounting Portfolio 5104-2nd, Revenue Recognition: International Accounting Standards, discusses revenue recognition principles under International Financial Reporting Standards (IFRS). The IFRS rules regarding revenue recognition are similar in principle to the U.S. Generally Accepted
Accounting Principles (GAAP) rules on the subject; however, the two sets of rules may produce very different results under any given set of facts. Moreover, IFRS does not possess the detailed guidance that U.S. GAAP possesses. To wit, U.S. GAAP was developed through more than 140 pronouncements on revenue recognition, the rules of which are now spread among several Topics in the FASB Accounting Standards Codification. In contrast, IFRS contains fewer than 10 such pronouncements.
This Portfolio first explains the general principles of revenue recognition under the IFRS conceptual framework. It then examines the general principles of International Accounting Standard (IAS) 18, Revenue, as well as the specific principles related to the (1) sale of goods, (2) the provision of services, and (3) the receipt of interest, royalties, and dividends. It also discusses how these IAS 18 principles apply to the recognition of revenue from the sale of software, which is a topic that is governed by extensive U.S. GAAP guidance but is not specifically addressed under IFRS. An area that IFRS does address specifically — accounting for revenues from construction contracts — is outside the scope of this Portfolio. Lastly, the Portfolio discusses the joint project between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Boards (FASB) to converge the manner in which IFRS and U.S. GAAP approach revenue recognition issues.
Throughout, the Portfolio compares and contrasts the IFRS principles with U.S. GAAP. When appropriate, the Portfolio cites other portfolios that more fully explain the U.S. GAAP rules. Those other portfolios, all of which exclusively address the U.S. GAAP rules, are BNA Tax and Accounting Portfolio 5100, Starczewski, Mallek, and Beil, Revenue Recognition: Fundamental Principles (Accounting Policy and Practice Series); BNA Tax and Accounting Portfolio 5101, Starczewski, Beil, and Mallek, Revenue Recognition: Product Sales and Services (Accounting Policy and Practice Series); and BNA Tax and Accounting Portfolio 5103, Starczewski, Fritz, and Rowe, Revenue Recognition: Software (Accounting Policy and Practice Series).
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5104-2nd, Jones and Venuti, Revenue Recognition: International Accounting Standards (Accounting Policy and Practice Series).


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AUTHORS

RICHARD C. JONES
Richard C. Jones, B.S. (Accounting), Drexel University; Ph.D. (Accounting), Rutgers, the State
University of New Jersey. Associate Professor of Accounting, Hofstra University. Member, American Accounting Association; American Institute of CPAs. Awards and Honors include Zarb School of Business Dean's Outstanding Teacher Award, the Hofstra University 2001 Distinguished Teacher of the Year Award, the 1999 Dominick Marsicovetere Faculty Award for Outstanding Dedication to the Students, the KPMG Peat Marwick Foundation Doctoral Scholarship Award, and the Rutgers' University Minority Advanced Placement Fellowship. Published work has appeared in The CPA Journal, Bank Accounting and Finance, and the International Federation of Accountants Quarterly. Prior to joining the accounting faculty at Hofstra, Dr. Jones was a vice president of a banking corporation, a member of the staff of the Financial Accounting Standards Board (FASB), a special projects manager for a foundry company, and a staff auditor in public accounting.

ELIZABETH K. VENUTI
Elizabeth K. Venuti, B.S. (Business Management and Marketing), Cornell University; Ph.D. (Accounting), Columbia University Graduate School of Business. Associate Professor of Accounting, Hofstra University. Member, American Institute of Certified Public Accountants; New York State Society of Certified Public Accountants and the American Accounting Association. Awards and Honors include Hofstra University 2006 Distinguished Teacher of the Year Award, 2008 Zarb School of Business Dean's Outstanding Service Award, the 2005 Dominick Marsicovetere Faculty Award for Outstanding Dedication to the Students and six annual Outstanding Chapter Service Awards from the New York State Society of Certified Public Accountants. Published work has appeared in the Journal of Accounting Research, the Asia-Pacific Journal of Accounting and Economics, the CPA Journal and other business periodicals. Prior to joining the accounting faculty at Hofstra, Dr. Venuti taught accounting at the Bernard M. Baruch College of The City University of New York and prior to that worked as a senior auditor in public accounting.

TABLE OF CONTENTS

Detailed Analysis

I. Background and Scope of Portfolio

A. Scope of Portfolio

B. IFRS v. U.S. GAAP Approach to Revenue Recognition

II. The International Accounting Standards Board Framework

Introductory Material

A. Asset/Liability View to Financial Statement Elements

B. Income Defined

1. IASB Framework

2. U.S. GAAP Comparison

C. Concept of Recognition

1. Defining an Element

2. Describing an Element and Showing Its Monetary Amount

3. Probable Future Economic Benefit

4. Reliable Measurement

D. IFRS Hierarchy

III. Principles For Recognizing And Reporting Revenue Transactions

Introductory Material

A. Reporting Revenue: International Accounting Standard 1 and the Presentation of Revenue on the Income Statement

1. Overall Considerations

a. Fair Presentation

b. Assessing the Enterprise's Ability to Continue As a Going Concern

c. Reporting on an Accrual Basis

d. Consistency of Presentation

e. Presenting Material Categories of Financial Statement Items

f. Offsetting Financial Statement Line Items

g. Displaying and Disclosing Comparative Information

2. Structure and Content of the Income Statement

B. Recognizing Revenue Under International Accounting Standard (IAS) 18

1. Terminology

2. Measuring Revenue

a. Trade Discounts and Volume Rebates

(1) Trade Discounts and Volume Rebates

(2) Cash Discounts

(3) Customer Loyalty Programs

b. Timing of Cash Received or Receivable

c. Transactions Involving Receipt of Goods or Services

3. Identifying a Sales Transaction

a. Multiple-Element Arrangements

b. Related Separate Transactions

IV. Sales Of Goods

Introductory Material

A. Revenue Recognition Criteria for the Sale of Goods

1. Transfer of the Risks and Rewards of Ownership

2. Seller Relinquishes Managerial Involvement and Control

3. Amount of Revenue Can Be Reliably Measured

4. Economic Benefits Associated With the Sale Flows to the Seller

5. Transaction Costs Can Be Reliably Measured

B. Common Revenue Recognition Transactions Involving Sale of Goods

1. Bill and Hold Sales

2. Consignment Sales

3. Sales With Repurchase Provisions

4. Real Estate Sales

5. Nonmonetary Exchanges of Goods

V. Rendering Of Services

A. Revenue Recognition Criteria for the Rendering of Services

1. Amount of Revenue Can Be Reliably Measured

2. Economic Benefits Flow to the Provider of the Service

3. Stage of Completion Can Be Reliably Measured

4. Transaction Costs Can Be Reliably Measured

B. Common Revenue Recognition Transactions Involving Rendering of Services

1. Financial Services Fees

a. Fees That Are a Component of Interest Earned

b. Fees Earned as Services Are Provided

c. Fees Earned Upon the Execution of a Significant Activity

2. Franchise Fees

3. Servicing Fees Included in a Product's Price

4. Advertising Commissions

a. In General

b. Barter Transactions Involving Advertising Services

5. Initiation, Entrance and Membership Fees

VI. Interest, Royalties, And Dividends

Introductory Material

A. Interest Revenue

B. Royalty Revenue

C. Dividend Revenue

VII. Revenue Recognition For Software

Introductory Material

Content

VIII. Disclosure

Introductory Material

A. Disclosures Regarding Revenue

B. Disclosures Regarding Liabilities From Warranty Arrangements

IX. Joint Projects Of The International Accounting Standards Board And Financial Accounting Standards Board: The Conceptual Framework And Revenue Recognition

Introductory Material

A. The Conceptual Framework Project â€" Background and Project Status

1. Conceptual Projects

2. Objectives and Qualitative Characteristics Phase

B. Revenue Recognition Project - Background and Project Status


WORKING PAPERS

Working Papers

TABLE OF WORKSHEETS

Worksheet 1 Glossary

Worksheet 2 Sample Income Statement Formats, (From IAS 1, Presentation of Financial Statements)

Worksheet 3 Basic Disclosures Identifying the Entity and Describing the Basis for Presenting Financial Information, Including Revenue

Worksheet 4 FASB Proposal Regarding Revenue Recognition Project

Worksheet 5 IASB-FASB Revenue Recognition Project Summary

Worksheet 6 Snapshot: Preliminary Views on Revenue Recognition in Contracts with Customers

Worksheet 7 Comparison of the Proposed Current Exit Price Approach and Original Transaction Price Approach Models for Measuring Revenue

Worksheet 8 Revenue Recognition Under the Current Exit Price Measurement Approach

Worksheet 9 Revenue Recognition Under the Original Transaction Price Approach

Worksheet 10 Select International Financial Reporting Standards (IFRS) -Based Income Statements from IFRS Filers

Bibliography

OFFICIAL

Federal Statutes

U.S. Securities and Exchange Commission (SEC):

SEC Releases

SEC Staff Accounting Bulletins

SEC Filings

Accounting Principles Board Opinions

American Institute of Certified Public Accountants (AICPA):

Accounting Standards Executive Committee (AcSEC)

AICPA Statements on Auditing Standards

AICPA Accounting Research Bulletins

Emerging Issues Task Force Issues

Financial Accounting Standards Board (FASB):

FASB Concepts Statements

FASB Statements of Financial Accounting Standards

FASB and IASB

International Accounting Standards Board Standards

Other IASB Pronouncements

International Financial Reporting Interpretations Committee Interpretations

Standing Interpretations Committee Interpretations

Public Company Accounting Oversight Board Interim Auditing Standards

Miscellaneous

UNOFFICIAL

BNA Portfolios

Books and Textbooks