Abstract:

The accounting rules for revenue recognition and measurement is of great importance for all companies that are required to prepare and present their financial statements. A new accounting standard on revenues from contracts with customers was issued in 2014 with initial effective date 1 January 2017. Due to its complexity, this effective date was postponed to 1 January 2018. Before the IFRS 15 two standards were dealing with revenue recognition and measurement, namely IAS 18 - Revenues and IAS 11 - Construction Contracts. International Financial Reporting Standards (IFRSs) continuously, since 2002 when Norwalk Agreement between the IASB and the FASB was signed, have been harmonized with the US Generally Accepted Accounting Principles. Shortly after the conclusion of this agreement the problem of insufficient compliance of the revenues' recognition and measurement rules between these two sets of standards has been recognized, and the changes to IAS 18 and IAS 11 have already begun to be considered. Those standards were short and provided only the limited framework for revenue recognition and largely required accounting estimation and judgment. This led to different practice of revenue recognition in the same industries, especially in those with multiple-element arrangements. Consequently, information on revenues in income statements was not completely comparable and some problems on the evaluation of business performance could appear. Therefore, the IASB and the FASB initiated a joint project to clarify the principles for recognizing revenue and develop a common revenue standard for the IFRSs and the US GAAP. Some of the reasons for issuing new accounting standard on revenues were to remove inconsistencies and weaknesses in existing revenue requirements, improve comparability of revenues across entities and industries, provide more useful information to the financial statement users as well as provide more detail framework for revenue recognition. The beginning of this project was marked by the issuance of a document entitled „Discussion Paper Preliminary Views on Revenue Recognition in Contracts with Customers published in 2008“. Afterwards in 2010 „Exposure Draft ED/2010/6 Revenue from Contracts with Customers „was issued. The process of creating a new standard usually takes several years and it is known as dual process in which all interested professionals can be involved through its comments on Discussion Papers and Exposure Drafts sent to the IASB. In addition to the IASB experts, the dual process includes investors, academics, reporting entities as well as national standard setters etc. The research goal of this paper is to analyze the whole process of creating a new revenue standard and identify the most significant interest groups who were involved in dual standard setting process. Furthermore, the goal of the paper is to investigate to what extent the US FASB and the IASB have influenced the new revenue standard. Research methodology is based on the examination of relevant documents regarding the topic available on the IASBs and FASBs. The methods to be used to achieve the goal of this paper are; methods of descriptive statistics, the method of analysis and synthesis, induction and deduction method and descriptive method.