Revenue recognition lacks consistency
Revenue recognition is in a state of flux with a severe lack of consistency in accounting policies, according to monthly financial reporting monitor Company Reporting.
Of 600 companies analysed by the monthly publication, 43% do not even disclose a revenue recognition policy. Revenue recognition – or when a company books its sales – was a topic picked up by the Accounting Standards Board last year when it published a discussion paper intended as the first step in what is expected to be a protracted debate.
Until now, there has been no guidance in the UK on revenue recognition and accountants have been using their judgement as to what accounting policy should be applied, or turning to international or US standards.
According to the ASB: ‘The recognition and measurement of revenue are of fundamental importance to proper financial reporting.’
But, it is still unknown whether the ASB will recommend companies disclose revenue for each separate revenue stream or if it will follow the US model and stop at policy disclosure.
A Company Reporting analysis said: ‘Disclosure of how revenue is recognised is beneficial to analysts however an even more useful disclosure, which would allow comparability between companies, is the level of revenue that flows from each separate stream.
‘Thus far, it appears that company’s seem oblivious to the demand for this additional disclosure or are unwilling to provide it.’