Revenue Recognition - Essay Example

The proposed standard will definitely be an effective approach for the companies in the post-modern era. The standards would eradicate discrepancies and drawbacks of the current practices of revenue recognition. Revenue is the essential aspect of companies and if the standards are not appropriate and acceptable, then smooth operations of the accounting departments of the companies might get hampered. Through the proposed standard for revenue recognition, a stronger framework aimed at tackling the process of revenue recognition will be developed.

The strong framework would assist the companies in effectively handling the various issues related to revenue which will add value towards the accounting measures of the companies in turn. Another advantage that the proposed standard would provide is concerned with the improvement of the factor of comparability of the various practices of revenue recognition throughout the existing several numbers of industries, entities, capital markets and jurisdictions. Finally, the proposed standard will be of extreme help towards the simplification of organizing the financial statements of the companies as this would decrease the enormous amount of requirements like that of the present (Financial Accounting Standards Board, 2010).

The anticipated reaction from the companies in the United States (US) as against the proposed changes in the standards for revenue recognition will be wide and varied. This is because, on one hand, the ease of the US companies dealing with international trading business would increase, while on the other hand, the companies would have to alter their existing methods of accounting operations involving a huge amount of costs.