Advertisement

UK GAAP pp 129-175 | Cite as

Revenue recognition

  • Mike Davies
  • Ron Paterson
  • Allister Wilson

Abstract

Revenue is generally discussed in accounting literature in terms of inflows of assets to an enterprise which occur as a result of outflows of goods and services from the enterprise. For this reason, the concept of revenue has normally been associated with specific accounting procedures which were primarily directed towards determining the timing and measurement of revenue in the context of the historical cost double-entry system. For example, APB Statement No. 4 defined revenue as the ‘gross increases in assets or gross decreases in liabilities recognized and measured in conformity with generally accepted accounting principles that result from those types of profit-directed activities of an enterprise that can change owners’ equity’.1 Consequently, the accounting principles which evolved focused on determining when transactions should be recognised in the financial statements, what amounts were involved in each transaction, how these amounts should be classified and how they should be allocated between accounting periods.

Keywords

Accounting Period Accounting Treatment Loss Account Accounting Policy Draft Statement 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    APB Statement No. 4, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises, AICPA, October 1970, para. 134.Google Scholar
  2. 2.
    The Council of the European Communities, The Second Council Directive on Company Law, 77/91/EEC.Google Scholar
  3. 3.
    Ibid., Article 15.1(c).Google Scholar
  4. 4.
    CCAB, The determination of realised profits and disclosure of distributable profits in the context of the Companies Acts 1948 to 1981 (TR 481), September 1982, paras. 4–6, passim. Google Scholar
  5. 5.
    Ibid., para. 10.Google Scholar
  6. 6.
    SSAP 2, Disclosure of accounting policies, November 1971, para. 14.Google Scholar
  7. 7.
    Professor Sir Bryan Carsberg and Christopher Noke, The reporting of profits and the concept of realisation: A report prepared for the Research Board of the Institute of Chartered Accountants in England and Wales, London, 1989, p. 41.Google Scholar
  8. 8.
    Ibid., p. 42.Google Scholar
  9. 9.
    Exposure Draft, Statement of Principles for Financial Reporting, ASB, November 1995, Chapter 4.Google Scholar
  10. 10.
    Ibid., para. 6.26.Google Scholar
  11. 11.
    APB Statement No. 4, para. 150.Google Scholar
  12. 12.
    Ibid., para. 151.Google Scholar
  13. 13.
    Ibid., para. 152.Google Scholar
  14. 14.
    John H. Myers, ‘The Critical Event and Recognition of Net Profit’, Accounting Review 34, October 1959, pp. 528–532.Google Scholar
  15. 15.
    SFAC No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, FASB, December 1984, paras. 83 and 84.Google Scholar
  16. 16.
    Sale of Goods Act 1979, s 2(1).Google Scholar
  17. 17.
    Ibid., s 2(4).Google Scholar
  18. 18.
    Ibid., s 2(5).Google Scholar
  19. 19.
    Ibid., s 18, Rule 1.Google Scholar
  20. 20.
    Ibid., s 18, Rule 2.Google Scholar
  21. 21.
    APB Statement No. 4, para. 151.Google Scholar
  22. 22.
    SFAC No. 5, paras. 83 and 84.Google Scholar
  23. 23.
    SFAS 48, Revenue Recognition When Right of Return Exists, FASB, June 1981, para. 6.Google Scholar
  24. 24.
  25. 25.
    Ibid., para. 8.Google Scholar
  26. 26.
    APB Statement No. 4, para. 150.Google Scholar
  27. 27.
    LASC, Draft Statement of Principles, Agriculture, IASC, December 1996.Google Scholar
  28. 28.
    CA 85, Sch. 4, para. 12(a).Google Scholar
  29. 29.
    Ibid., s 262(3).Google Scholar
  30. 30.
    Exposure Draft, Statement of Principles for Financial Reporting, ASB, para. 4.5.Google Scholar
  31. 31.
    Ibid., para. 4.6.Google Scholar
  32. 32.
    Ibid., para. 4.7.Google Scholar
  33. 33.
    Ibid., para. 4.8.Google Scholar
  34. 34.
    Ibid., para. 4.11.Google Scholar
  35. 35.
    Ibid., para. 4.15.Google Scholar
  36. 36.
  37. 37.
    Ibid., para 4.24.Google Scholar
  38. 38.
  39. 39.
    Ibid., para. 4.29.Google Scholar
  40. 40.
    Ibid., para. 6.26.Google Scholar
  41. 41.
    IAS 18 (Original), Revenue Recognition, IASC, December 1982, para. 4.Google Scholar
  42. 42.
    IAS 18, Revenue, IASC, Revised 118 1993.Google Scholar
  43. 43.
    Ibid., para. 1.Google Scholar
  44. 44.
    Ibid., para. 7.Google Scholar
  45. 45.
    Ibid., para. 10.Google Scholar
  46. 46.
    Ibid., para. 7.Google Scholar
  47. 47.
    Ibid., para. 11.Google Scholar
  48. 48.
    Ibid., para. 12.Google Scholar
  49. 49.
    Ibid., para. 14.Google Scholar
  50. 50.
    Ibid., para. 16.Google Scholar
  51. 51.
    Ibid., para. 15.Google Scholar
  52. 52.
    Ibid., para. 17.Google Scholar
  53. 53.
    Ibid., para. 20.Google Scholar
  54. 54.
    Ibid., para. 26.Google Scholar
  55. 55.
    Ibid., para. 20.Google Scholar
  56. 56.
    Ibid., para. 24.Google Scholar
  57. 57.
    Ibid., para. 25.Google Scholar
  58. 58.
    Ibid., para. 35.Google Scholar
  59. 59.
    ARB 43, Restatement and Revision of Accounting Research Bulletins, AICPA, June 1953, Chapter 1, Section A, para. 1.Google Scholar
  60. 60.
  61. 61.
    Ibid., Chapter 11, Section A, para. 11.Google Scholar
  62. 62.
    Ibid., para. 13.Google Scholar
  63. 63.
    ARB No. 45, Long-Term Construction-Type Contracts, AICPA, October 1955, para. 15.Google Scholar
  64. 64.
    SFAC No. 5, para. 83.Google Scholar
  65. 65.
  66. 66.
  67. 67.
  68. 68.
    Based on the AICPA Industry Accounting Guide, Accounting for Franchise Fee Revenue, AICPA, 1973.Google Scholar
  69. 69.
    SFAS 45, Accounting for Franchise Fee Revenue, FASB, March 1981, para. 5.Google Scholar
  70. 70.
  71. 71.
    Ibid., para 12.Google Scholar
  72. 72.
    IAS 18, Appendix, para. 18.Google Scholar
  73. 73.
    Ibid., Appendix, para. 18(b).Google Scholar
  74. 74.
    SFAS 50, Financial Reporting in the Record and Music Industry, FASB, November 1981, para. 8.Google Scholar
  75. 75.
    SFAS 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, FASB, December 1986, para. 5.Google Scholar
  76. 76.
  77. 77.
    IAS 18, Appendix, para. 14.Google Scholar
  78. 78.
    C. I. Brown, D. J. Mallett and M. G. Taylor, Banks: An Accounting and Auditing Guide, Industry Accounting and Auditing Guide published by the ICAEW, 1983, para. 20.2.Google Scholar
  79. 79.
    SFAS 91, para. 8.Google Scholar
  80. 80.
    Ibid., para. 8a.Google Scholar
  81. 81.
    Ibid., para. 8b.Google Scholar
  82. 82.
    This is also the view taken in the US; see SFAS 91 at para. 10.Google Scholar
  83. 83.
    Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Limited [1976] WLR 676.Google Scholar
  84. 84.
    Accounting Recommendation 2.207, Accounting for goods sold subject to reservation of title, ICAEW, July 1976.Google Scholar
  85. 85.
    Exposure Draft, Statement of Principles for Financial Reporting, ASB, para. 4.30Google Scholar
  86. 86.
    IAS 18, Appendix, para. 12.Google Scholar
  87. 87.
    AICPA, Statement of Position 91–1, Software Revenue Recognition, December 12, 1991, para. 32.Google Scholar
  88. 88.
    Ibid., para. 33.Google Scholar
  89. 89.
    SSAP 9, Stocks and long-term contracts, Revised September 1988, para. 22.Google Scholar
  90. 90.
    Ibid., paras. 28 and 29.Google Scholar
  91. 91.
    AICPA, SOP 91–1, para. 34.Google Scholar
  92. 92.
    SFAS 53, Financial Reporting by Producers and Distributors of Motion Picture Films, FASB, December 1981, para. 6.Google Scholar
  93. 93.
    IAS 18, Appendix, para. 9.Google Scholar
  94. 94.
    SFAS 66, Accounting for Sales of Real Estate, FASB, October 1982, para. 5.Google Scholar
  95. 95.
    Ibid., para. 6.Google Scholar
  96. 96.
  97. 97.
    ASC, Guidance Notes on SSAP 21: Accounting for Leases and Hire Purchase Contracts, August 1984, paras. 150–156, passim.Google Scholar
  98. 98.
    IAS 18, para. 12.Google Scholar
  99. 99.
    APB Opinion No. 29, Accounting for Nonmonetary Transactions, Accounting Principles Board, May 1973, para. 18.Google Scholar
  100. 100.
    Ibid., para. 26.Google Scholar
  101. 101.
    Ibid., paras. 3e and 21b.Google Scholar

Copyright information

© Ernst & Young 1997

Authors and Affiliations

  • Mike Davies
  • Ron Paterson
  • Allister Wilson

There are no affiliations available

Personalised recommendations