Why look at revenue recognition now?
Certainly, revenue recognition has been in the news recently. There has been much discussion about the range of different accounting policies adopted by software companies, with pressure from analysts and shareholders to achieve greater consistency of reporting in that sector. Separately, the Auditing Practices Board issued a Consultation Paper at the end of June focusing on ‘aggressive earnings management’, with revenue recognition being one of the concerns at the heart of that debate. But the Discussion Paper was not prompted by these developments, nor does it discuss revenue recognition issues arising in specific industries, such as the software industry. Rather, the Paper focuses on the underlying problem, which is that, with the increasing complexity of business activities, traditional drivers of revenue—such as ‘earning’, realisation, accruals/matching and prudence—are becoming harder to apply. Faced with difficult questions over revenue recognition, different companies are findi
