Revised rules on revenue recognition expected to make financial statement clearer

Deloitte welcomes the revised thinking in the new exposure draft on revenue recognition that was published today. Most financial reporting standards affect just one narrow aspect of financial reporting. The standard on revenue recognition is important because it goes to the heart of financial statements and covers a very wide range of possible activities. The IASB has, in revising its previous thinking, clarified several troublesome areas so that these proposals are expected to be more operational and practical than the previous exposure draft.

“Revenue is the most important item in financial statements,” said Veronica Poole, Global Leader- IFRS Technical, Deloitte Touche Tohmatsu Limited, “and revenue recognition covers everything under the sun. It is one of the most difficult standards for standard-setters to write but a revised, robust, financial reporting standard in this critical area is needed and this exposure draft, an effective step in the right direction, is welcomed.”

Joel Osnoss, Global Leader- IFRS Clients and Markets, Deloitte Touche Tohmatsu Limited said: “This will not just affect financial statements. Everyone really needs to look carefully at the proposals and how they may change industry practices. The sensible course would be for everyone to think through how it may affect them. Systems will have to be checked. Accounting policies will have to be adapted. Debt covenants will have to be looked at and contracts may need to be modified.”