What impact will the new rules have on Revenue Recognition?
Downey: IFRS differs from U.S. GAAP in that it is principles-based rather than rules- based, which may lead to less revenue being deferred and more being realized. IFRS provides less detail including significantly less industry specific instruction and less extensive guidance for areas like revenue recognition. For example, the general revenue recognition criteria are similar between U.S. GAAP and IFRS; however under U.S. GAAP there are over 100 citations for revenue recognition. Consequently, many IFRS reporting companies look to U.S. GAAP for guidance to formulate accounting policies for specific transactions. Currently international and U.S. accounting standard setters are working to minimize differences between the two systems; however big gaps remain in some areas. The SEC proposal would require narrowing these gaps before requiring U.S. companies to convert. Companies should expect a change in their pattern of earnings and financial position and should be comfortable explaining t
