Revenue Recognition Based on Net Position: A Critical Study

Accounting, Vol. 61, No. 9, pp. 6–15, 2009

16 Pages Posted: 3 Jun 2011

See all articles by Eiko Tsujiyama

Eiko Tsujiyama

Waseda University - Graduate School of Commerce

Date Written: September 2009

Abstract

The notable discussion paper (DP): Preliminary Views on Revenue Recognition in Contracts with Customers was issued by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) in December 2008. We could identify the following two main proposals contained in the DP. First, revenue should be recognized on the basis of increases in an entity’s net position in a contract with a customer. Second, revenue should be recognized at the time of satisfying performance obligation. This paper focuses on the first proposition because, according to the DP, the model proposed in it aims to develop a new model on revenue recognition based on net position. This paper concludes that, with respect to rebuilding the revenue recognition model based on changes in net position, the DP contains serious self-contradictions.

Keywords: Revenue recognition, Assets and liabilities approach, Net position, Earnings process, Customer consideration, Current exit value

Suggested Citation

Tsujiyama, Eiko, Revenue Recognition Based on Net Position: A Critical Study (September 2009). Accounting, Vol. 61, No. 9, pp. 6–15, 2009 , Available at SSRN: https://ssrn.com/abstract=1856978

Eiko Tsujiyama (Contact Author)

Waseda University - Graduate School of Commerce ( email )

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