Wiley GAAP 2008

Service Revenues: Perspective and Issues

Services represent over half of the transactions completed in the US economy, but there are no official pronouncements that provide specific accounting standards for them. Accounting for service transactions has evolved primarily through industry practice, and as a result, different accounting methods have developed to apply the fundamental principles of revenue and cost recognition. In fact, different accounting methods are used by similar entities for practically identical transactions.

FASB is currently pursuing a major project addressing revenue recognition, which would resolve the accounting for service transactions. That project is not expected to yield final standards before late 2008. In the interim, until definitive standards regarding revenue recognition are promulgated, this section can still provide relevant guidance on service industry issues. In addition, the guidance provided by the SEC in Staff Accounting Bulletin 101 and its replacement, SAB 104, discussed in the introductory materials to this chapter, is highly relevant to accounting for service transactions and should be deemed pertinent to accounting even by nonpublic reporting entities, inasmuch as it reflects the current thinking by an authoritative source of GAAP.

Table . 10-1: Sources of GAAP

Other	FTB	EITF	SOP
1	90‐1	91‐9, 01‐14	98‐5

^[1]

^[1] SEC Staff Accounting Bulletins 101 and 104