Revenue Recognition – Revised Proposals Issued

The development of a new standard for revenue recognition was discussed in the summer 2011 edition of Financial reporting. Since then the IASB has issued a revised exposure draft in response to feedback received on their original proposals.

The IASB decided to revise its proposals after receiving over a thousand comment letters on the original exposure draft (ED), many of which expressed concern that it was not clear how to apply the proposed core principles in practice, particularly to contracts for services and construction contracts.

Proposals in the revised ED

The core principle set out in the revised ED is consistent with the original ED, that "an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services".