How does revenue recognition differ under various accounting standards (e.g. , IFRS vs. GAAP)?

To understand the difference in Revenue recognition under IFRS and GAAP , it is important to understand what are IFRS and GAAP. Both of these are accounting standards accepted globally.  These are discussed below:

What is IFRS?

IFRS is a set of accounting standards developed by the International Accounting Standards Board. These standards are globally accepted accounting standards.

They were developed and implemented with the objective of providing a consistent, transparent and reliable framework for the presentation and reporting of financial statements.

IFRS ensure uniformity and this helps in comparability of financial statements across the companies of different countries.

Some examples of IFRS Standards are : IFRS 2 – Share based payments, IFRS 9 – Financial Instruments, IFRS 16 – Leases, etc.

What is GAAP?

GAAP stands for Generally Accepted Accounting Principles. GAAP is primarily used in the USA. These are a set of accounting principles, rules and procedures which are crucial for providing consistency and transparency in the presentation and reporting of financial statements.

Some examples of GAAP Standards are: ASC 606: Revenue Recognition, ASC 842: Leases, ASC 740: Income Taxes, etc.

Difference in Revenue Recognition under IFRS and GAAP

Though both of these standards have the main goal of promoting consistency and uniformity, there are certain differences in the Revenue Recognition under IFRS and GAAP.

This is because of the fact that the nature of IFRS and GAAP is different as IFRS is more principle- based and GAAP is rule based.