A shifting software revenue recognition landscape? Insights on potential impacts of IFRS and US GAAP Convergence

March 2008

Convergence between IFRS and US GAAP is expected to simplify financial reporting and reduce the compliance burden for companies listed in more than one jurisdiction and those that participate in cross-border capital-market transactions. Following encouraging moves in the USA it looks increasingly likely that most companies worldwide will eventually report under IFRS.

However in the software sector many companies worldwide have chosen to report directly under US GAAP, or have incorporated its detailed guidance to help amplify accounting policies for revenue recognition. Management and investors may be tempted to assume that following the stricter US GAAP software revenue recognition criteria brings de facto compliance with IFRS, but this is not necessarily the case. In this thought provoking paper, we examine certain situations in which adopting IFRS may require a reconsideration of software revenue recognition policies and practices that were driven by US GAAP compliance.

This report reviews the compatibility of US GAAP and IFRS around five issues. For each issue we highlight the context, give a summary of the US GAAP approach and compare it with that under IFRS.

To order a hard copy of the report please visit our Global Publications page.