6 Revenue recognition
‘The sweeping revisions in revenue-recognition rules will represent a change for many industries.’
Christine Klimek, spokeswoman for the Financial Accounting Standards Board as reported in The Wall Street Journal
In a nutshell
Revenue recognition determines both when and how much revenue can be recognised in a company’s accounts.
For most companies, revenue is recognised at the point of sale in business transactions. This is usually the point at which legal title to goods passes from a seller to a buyer. In complex transactions or those that involve judgement there is scope for error or manipulation of revenue numbers.
Every company will need to determine (and disclose) its revenue recognition policies. For companies ...