Open AccessDo GAAP And IFRS Differ In Collectiblity Judgments Related To Revenue Recognition?
Author(s) -
Ning Du,
R. Mark Alford,
Patricia L. Smith
Publication year - 2016
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v32i6.9815
Subject(s) - revenue recognition , accounting , setter , revenue , financial statement , business , accounting standard , statement (logic) , international financial reporting standards , work (physics) , actuarial science , financial accounting , audit , accounting information system , political science , law , mechanical engineering , archaeology , history , engineering
The goal of this study is to examine whether financial statement preparers may interpret the collectibility threshold differently given the differences in the prior definitions of “probable” in IFRS and GAAP. We conducted an experiment where participants were provided with either the IFRS or GAAP definition of “probable” and then asked to evaluate five short revenue recognition scenarios. We find that their judgments regarding collectibility of consideration did not differ across the IFRS or GAAP conditions. This study contributes to the prior accounting literature on interpreting vague verbal probability terms and expands this line of work to the arena of revenue recognition. Our results also provide insight for standard setter and policy makers in their efforts to achieve true convergence in accounting standards.