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.
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References
APB Statement No. 4, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises, AICPA, October 1970, para. 134.
The Council of the European Communities, The Second Council Directive on Company Law, 77/91/EEC.
Ibid., Article 15.1(c).
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.
Ibid., para. 10.
SSAP 2, Disclosure of accounting policies, November 1971, para. 14.
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.
Ibid., p. 42.
The recognition of items in financial statements, Discussion Draft of Chapter 4 of Statement of Principles, ASB, July 1992, paras. 4 and 55.
APB Statement No. 4, para. 150.
Ibid., para. 151.
Ibid., para. 152.
John H. Myers, ‘The Critical Event and Recognition of Net Profit’, Accounting Review 34, October 1959, pp. 528–32.
SFAC No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, FASB, December 1984, paras. 83 and 84.
Sale of Goods Act 1979, s 2(1).
Ibid., s 2(4).
Ibid., s 2(5).
Ibid., s 18, Rule 1.
Ibid., s 18, Rule 2.
APB Statement No. 4, para. 151.
SFAC No. 5, paras. 83 and 84.
SFAS 48, Revenue Recognition When Right of Return Exists, FASB, June 1981, para. 6.
Ibid.
Ibid., para. 8.
APB Statement No. 4, para. 150.
CA 85, Sch. 4, para. 12(a).
Ibid., s 262(3).
The recognition of items in financial statements, Discussion Draft of Chapter 4 of Statement of Principles, para. 4.
Ibid., para. 9.
Ibid., para. 11.
Ibid., para. 17.
Ibid., para. 55.
Ibid., para. 56.
Ibid., para. 57.
Ibid., para. 58.
Ibid., para. 59.
Ibid., para. 60.
Ibid., para. 61.
IAS 18, Revenue Recognition, IASC, December 1982, para. 4.
Ibid., para. 21.
IAS 16, Accounting for Property, Plant and Equipment, IASC, March 1982, para. 39.
IASC E43, Property, Plant and Equipment, May 1992, para. 20.
Ibid., para. 21.
IAS 18, para. 6.
Ibid., para. 8.
Ibid., para. 23.
Ibid., para. 6.
Ibid., para. 9.
Ibid., para. 24.
Ibid., para. 10.
Ibid., para. 24.
E32, paras. 48–53 and 82–84.
IAS 18, para. 25.
IASC, E41, Revenue Recognition, May 1992, para. 3.
Ibid., para. 11.
CICA Handbook, Section 1000, Fundamental accounting concepts, para. 41.
ARB 43, Restatement and Revision of Accounting Research Bulletins, AICPA, June 1953, Chapter 1, Section A, para. 1.
Ibid.
Ibid., Chapter 11, Section A, para. 11.
Ibid., para. 13.
ARB No. 45, Long-Term Construction-Type Contracts, AICPA, October 1955, para. 15.
SFAC No. 5, para. 83.
Ibid.
Ibid.
Ibid.
Based on the AICPA Industry Accounting Guide, Accounting for Franchise Fee Revenue, AICPA, 1973.
IAS 18, Appendix, Section B, para. 8.
Ibid.
SFAS 45, Accounting for Franchise Fee Revenue, FASB, March 1981, para. 5.
Ibid.
Ibid.,, para 12.
SFAS 50, Financial Reporting in the Record and Music Industry, FASB, November 1981, para. 8.
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.
Ibid.
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.
SFAS 91, para. 8.
Ibid., para. 8a.
Ibid., para. 8b.
This is also the view taken in the US, see SFAS 91 at para. 10.
Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Limited [1976] W.L.R. 676.
Accounting Recommendation 2.207, Accounting for goods sold subject to reservation of title, ICAEW, July 1976.
AICPA, Statement of Position 91–1, Software Revnue Recognition, December 12, 1991, para. 32.
Ibid., para. 33.
SSAP 9, Stocks and long-term contracts, Revised September 1988, para. 22.
Ibid., paras 28 and 29.
AICPA, SOP 91–1, para. 34.
SFAS 66, Accounting for Sales of Real Estate, FASB, October 1982, para. 5.
Ibid., para. 6.
Ibid.
SFAS 53, Financial Reporting by Producers and Distributors of Motion Picture Films, FASB, December 1981, para. 6.
ASC, Guidance Notes on SSAP 21: Accounting for Leases and Hire Purchase Contracts, August 1984, paras. 150–156, passim.
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Davies, M., Paterson, R., Wilson, A. (1992). Revenue recognition. In: UK Gaap. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12998-0_3
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