IFRS and US GAAP, with Website: A Comprehensive Comparison

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REVENUE

Revenue, arguably, is the most prominent figure in financial statements. Public company securities are influenced heavily by the revenue trends. Revenue is the lifeblood of a business. Cash flow begins with it. Consequently, the recognition of revenue is one of the most important facets of accounting information. Consistency of application is of utmost importance.

Despite the conventional wisdom that says that IFRS and US GAAP are far apart on revenue recognition, the core principles are the same. These are

1. An enforceable agreement
2. Reliability of measurement of revenue
3. Assurance of collectability
4. It is earned

The language, complexity and placement of the guidance contribute greatly to the difficulty in bridging the two standards. IFRS has six standards that touch revenue recognition. US GAAP contains 20-plus Accounting Standards Codification sections. Prior to the Codification, there were in excess of 100 documents from which US GAAP revenue recognition was garnered.

In broad strokes, US GAAP focuses more on what an entity cannot do, whereas IFRS focuses more on what an entity can do. In helps to understand that the multitude of US GAAP guidance on this subject has its roots in the curtailment of abuses of application. The groundbreaking SOP 97-2, the seminal document for revenue recognition for software companies, and the equally statuesque SAB 101 defined clearly units of account and thresholds over which revenue could be recognized. SOP 97-2 is full of bright lines. ...