Deutsches Rechnungslegungs Standards German Accounting Standards Committee e
- Slides: 8
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® Re-thinking Revenue Recognition Liesel Knorr, DRSC e. V. Brussels, 18 October 2006 -1 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® IFRSs on Revenue Recognition IAS 18 Revenue IAS 11 Construction Contracts IAS 17 Leases IAS 39 Financial Instruments: Recognition and Measurement IAS 41 Agriculture + recourse to US GAAP -2 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® IAS 18 Revenue – Underlying Principle Definition Gross inflow of economic benefits during the period arising in the course of the ordinary activities (IAS 18. 7) Recognition - Probable that economic benefits will flow to the entity - Amount of revenue can be measured reliably Measurement Fair value of the consideration received or receivable (IAS 18. 9) -3 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® IAS 18 Revenue – Underlying Principles (cont. ) Critical Events for the Recognition of Revenue Sale of goods - Transfer of the significant risks and rewards to the buyer - Entity retains neither continuing managerial involvement nor effective control - Costs incurred can be measured reliably Rendering of services - Stage of completion can be measured reliably - Costs incurred can be measured reliably -4 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® General Problems arising - - From a conceptual perspective - Recourse to the realization principle in IAS 18 is said to be contradictory to the definition of revenues in the framework (income = measurable changes of assets and liabilities) - Application of IAS 18 can lead to recognition of deferred assets and deferred liabilities which do not meet the definition of assets and liabilities From a practical perspective - Content of the realization principle often unclear (as evidenced by the need for extensive additional explanations in the appendix of IAS 18) - How to account for multiple element arrangements? -5 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® Current Developments Joint Project IASB and FASB (since 2002) Purpose: IASB: (Conceptual) Revision of IAS 18 & IAS 11 FASB: Development of one single Statement on Revenue Recognition together: Convergence! Discussion Paper end of 2007 (? ) -6 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee e. V. ® - IASB addresses the issue of revenue recognition starting from the Framework definition of income - That is: “Income is measurable changes in assets and liabilities” (= Assets and Liabilities Approach) - This approach shall not be overridden by notions of realization and completion of the earnings process. - New approach will also cover issues currently addressed by IAS 11 -7 - 18 October 2006
Deutsches Rechnungslegungs Standards German Accounting Standards Committee Deutsches Rechnungslegungs Standards Committee e. V. Accounting Standards Committee of Germany ® Zimmerstr. 30 10969 Berlin Tel. 030 20 64 12 0 Fax 030 20 64 12 15 www. drsc. de info@drsc. de -8 - Dr. Mareike Kühne – 24. 11. 2005
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