FASB Statement of Financial Accounting Concepts (CON) 5, Recognition and Measurement in the Financial Statements of Business Enterprises, establishes the historic guiding principle for revenue recognition. Under paragraph 83, for revenue to be recognized, it must be (a) realized or realizable and (b) earned. Revenue is “realized” when products, goods, services or other assets are exchanged for money or cash rights. They are “realizable” when the related assets received or held are readily convertible into known amounts of cash or cash rights. Revenue is “earned” when an entity has “substantially accomplished what it must do to be entitled to the benefits represented by the revenue.” SEC Staff Accounting Bulleting (SAB) 104, Revenue Recognition issued in December 2003 provided additional guidance on when revenue is realized or realizable and earned, establishing four basic criteria: (1) compelling evidence of an arrangement exists, (2) the delivery has occurred or services have been rendered, (3) the price paid by the seller to the buyer is fixed or determinable, and (4) collection is reasonably guaranteed. New Revenue Recognition Standard In a significant step toward convergence, the FASB and IASB (“i Board”) issued the Exposure Draft, Revenue from Contracts with Customers in 2010. The goal was to create a single joint revenue recognition standard that companies could apply consistently across industries and capital markets, thereby improving financial reporting. The Boards highlighted a number of improvements in the proposed standard: elimination of inconsistencies, improvement of comparability, request for greater disclosure and clarification of the accounting of contractual costs. Instead of focusing on “realized/achievable” and “earned,” Exposure D… in the middle of the paper… simply waits for revenue to be collected. Revenue recognition has been decoupled from the accrual principle. *Conclusions: It could become very critical, create confusion in the company, check PwC and other information for any doubts). This new standard represents a significant milestone in the convergence process and how revenue is not recognized. Instead of trying to match costs and revenues or determining when revenues are “earned,” the new standards focus on performance and control. (use PwC information)*Note: Please include more information on comments on the first and second drafts. Add more detailed information about each step. Commentators' conclusions (per conference and any online, but still worth noting at the beginning) and personal comments. History of IASB/FASB proposals – first ED, second, ED, final, comments – at the end of each section or summary at the end, see both IFRS and FASB Current thoughts – us, the auditors, etc