Overview and Analysis of the Proposed Revenue Recognition Standard Under Consideration by the IASB and the FASB

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Oil, Gas, and Energy Quarterly




Revenue is without a doubt one of the most important pieces of information reported in the financial statements. US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS) differ considerably in the timing and method of valuation of revenue recognition. It seems necessary to achieve a common ground on such an important topic as revenue recognition (FASB 2012). Therefore, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), the Boards, agreed to collaborate on a joint project to converge their respective accounting standards, US GAAP and IFRS. The revenue recognition principle proposed by the FASB and the IASB will result in a simplification of the codification of both US GAAP and IFRS. The new revenue recognition principle is very different from current revenue recognition under US GAAP. It is a shift of focus from constructive evidence of a transaction to a satisfaction of performance obligations under a contract.

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