1.1 The basis for the recognition of income - accrual basis

After the formation of modern enterprises, due to the separation of ownership and management rights, the fiduciary responsibility becomes the owner and operator** * Issues of common concern have gradually become the goal of financial accounting. The accrual system is derived from such an economic environment.

From the perspective of double-entry bookkeeping, when an income is recognized, an increase in an asset or a decrease in a liability will be recognized; when an expense is recognized, a decrease or decrease in an asset will also be recognized. An increase in a liability. Accrual accounting involves the recognition of virtually all accounting elements. But revenue is the most complex element of accounting, and the recognition of revenue, especially when to recognize it, may be one of the most complex issues in financial accounting. The recognition of income means that the right to collect income has occurred, and the recognition of related expenses means that the responsibility to pay expenses has been determined. Therefore, the accrual basis is mainly for the recognition of income and expenses.

1.2 Principles of revenue recognition—substance over form

In the "Accounting Standards for Business Enterprises - Revenue" (hereinafter referred to as the "Revenue Standards"), it stipulates that the sales and provision of goods The recognition and measurement of income from three major types of transactions or matters, including labor services and use of the company's assets by others, also takes into account the special characteristics of transactions and matters such as construction contracts, non-monetary transactions, leasing, insurance contracts of insurance companies, futures, investments, and debt restructuring. nature, and their recognition principles are separately stipulated in their respective specific standards. Judging from the content of each confirmation, compared with the past, it reflects the principle of substance over form, that is, the condition for revenue recognition is not the delivery of ownership certificates or physical objects, but the transfer of the main risks and rewards of commodity ownership and other substantial matters. condition.

1.3 How to recognize income

In the "Income Standards", the definition of income is "generated from daily activities such as selling goods, providing services and using the company's assets by others. The total inflow of economic benefits, which does not include payments collected on behalf of third parties or customers." From this definition, it can be broken down into three important characteristics of income. First, it is the economic benefit formed by daily activities; second, this benefit inflow is generated by the enterprise selling goods, providing labor services and allowing others to use the assets of the enterprise. Obtained; thirdly, the inflow of economic benefits does not include the money collected on behalf of the company. In this way, accountants can recognize revenue from these three characteristics.

The recognition of revenue requires the professional judgment of accountants. For every transaction or event related to income, it is necessary to identify whether the items corresponding to the income should be formally recorded in accounting, when they should be recorded and included in the statement, and whether the items recorded or included in the statement meet the requirements. Four basic criteria (definability, measurability, relevance and reliability)? It should also be considered: whether the income and related costs and expenses are proportional to each other, whether the benefits are greater than the costs, whether the income items that should be recorded and included in the statements comply with the principle of importance, etc. 2.1 The Trap of Operating Income

Because income is an economic event that leads to an increase in assets or a decrease in liabilities, or both, it is the source of corporate profits, and profits are not important to a company. It goes without saying that the "accrual basis" is adopted, so it is very particular about how, when and under what conditions the rights are determined and then the profits are determined. Some companies' financial statements have the following traps in operating revenue recognition:

2.1.1 Change the sales revenue recognition method. Some companies do not sell a single product, but an entire system, which requires implementation, installation and service. The sales process lasts a long time, so the revenue is not realized at once. Especially for sales realized across years, profits need to be allocated between years. Generally, enterprises divide the revenue realization ratio according to different stages of sales, and changes in such ratios will undoubtedly affect the profits of the current period.

2.1.2 Fictitious income. This is the most serious form of financial fraud, and there are several ways to do it: one is to issue a blank note and record it as a sale; the second is to issue an invoice to confirm the revenue; the third is to falsely issue an invoice to confirm the revenue. For example, a listed company uses a subsidiary to sell to a third party at market price, recognizes the subsidiary's sales revenue, and then has another subsidiary repurchase it from the third party. This approach avoids the constraint that intra-group transactions must be offset and ensures that transactions within the group must be offset. Revenue and profit are recognized in the consolidated statements, achieving the purpose of operating revenue.

2.1.3 Recognize revenue in advance. This situation includes: first, determining some uncertain income as income; second, improper application of the completion percentage method; third, mismatch between income and expenses; fourth, issuing invoices in advance to beautify performance. The method of recognizing revenue in advance is mainly used by companies with low current revenue and high expenses, especially in the real estate and high-tech industries.

2.1.4 Delay in recognizing revenue. Delayed recognition of revenue means that revenue that should be recognized in the current period is deferred to future periods. Like early recognition of revenue, delayed recognition of revenue is also a method of corporate earnings management. This method is generally used when the company's current earnings are relatively abundant, but its future earnings are expected to decrease.

2.2 Diversity and complexity of recognition

In accounting standards, the basic standards and main principles of recognition can only be summarized as follows:

① Meet the definition of income; have expected economic benefits flowing into the enterprise; and can be measured reliably.

②The income has been realized or can be realized (the right to receive cash has been obtained) and has been earned (the entire process of earning income has been completed).

③The ownership and risks related to the goods sold have actually been transferred; or the substance outweighs the form.

Obviously, after a transaction or event occurs, if it is only related to the sales revenue of goods, whether and when it should be recognized as revenue requires accountants to use professional knowledge and practical work experience, that is, professional judgment. , from the type of transaction, type of income, and whether there are any additional conditions at the time of sale, the ownership of the goods and the risks related to the goods have not been completely transferred in substance despite the superficial appearance that the money and goods are cleared. Only through analysis and judgment can we decide whether and when revenue should be recognized, what kind of records should be made, and how to correctly include it in the financial statements. Therefore, it can be said that whether and when to recognize the sales revenue of goods seems to be common accounting common sense. In fact, it is a very complicated and difficult question to answer.

2.3 The interest game between accounting standards in various countries

From the perspective of the overall environment of revenue recognition—the entire accounting standards and even the accounting standard system, my country’s accounting standards and other countries’ accounting standards and There are still varying degrees of differences between international accounting standards. Some of these differences are due to the different socioeconomic characteristics of each country, some are due to the different cultural and legal traditions of each country, and some are due to the differences between countries. Or caused by some technical flaws in the international accounting standards themselves. As overseas companies are listed in China's capital market, they will inevitably face the issue of selecting accounting standards. If an overseas company is listed on China's capital market and still prepares accounting statements in accordance with overseas standards, this is obviously not allowed by Chinese law; if an overseas company adjusts or prepares accounting statements in accordance with domestic accounting standards, it will be a problem for those who claim to be their own accountants. This may not be acceptable to countries whose accounting standards are better than those of China. From the above two aspects, this difference is a challenge to the procedures and methods related to revenue recognition in my country's standards. 3.1 Continuously improve the basic procedures for revenue recognition

In the "Accounting Standards - Revenue" guide, the recognition of revenue must be relatively principled and focus on the economic substance of the transaction. The following four conditions must be met before revenue can be recognized:

① The enterprise has transferred the risks and rewards of ownership of the goods to the buyer;

② The enterprise neither retains the rights and interests normally associated with ownership. The company continues to have management rights and does not exercise control over the sold goods;

③ The economic benefits related to the transaction can reasonably flow into the enterprise; ④ The related income and costs can be measured reliably.

This requires the enterprise to analyze the essence of the transaction based on the characteristics of different transactions, and correctly determine whether the main risks and rewards of ownership in each transaction have essentially been transferred, and whether the continued management rights related to ownership are retained. Whether the goods sold are still controlled, whether the relevant economic benefits can flow into the enterprise, whether the revenue and related costs can be reliably measured and other important conditions. Only when these conditions are met at the same time can the revenue be recognized, otherwise even if the goods have been shipped, or even if the goods have been No revenue can be recognized until the price is received.

How to avoid the "numbers game" of whitewashing profits from the aspects of recognition and measurement has always been a difficult problem in auditing. Regarding the recognition of revenue: the first is to find evidence of the existence of transactions and prevent fake sales. ; The second is to concretize the earned process; the third is to show that the measurement of income is reliable; the fourth is to require the ability to collect cash. In addition, auditors should pay special attention to fraud risks related to revenue recognition and apply effective analytical procedures during the planning stage to identify abnormal and unexpected relationships involving revenue and related accounts.

3.2 Efforts to improve the professional judgment ability of accountants

Although accounting recognition and measurement are important, because the accounting decisions they represent are deep-seated and little-known hidden Accounting activities are often not noticed by people, especially confirmation. In the face of increasingly complex and diversified transactions and events, recognition and measurement have put forward higher requirements for accountants, that is, they should think according to regulations when handling accounting and judge the decisions made through experience and their own business level. , we can call them accounting decisions.

The biggest problem that current accountants have is that they have long been accustomed to relying on ready-made accounting systems for accounting processing and lack the ability to make independent judgments. While formulating and implementing accounting standards, it is a very important task to strengthen the training of professional knowledge, reform and improve the assessment, evaluation and supervision system, and improve the quality of our country's accounting personnel. It is also indispensable in the construction of our country's accounting standards system. important component. Of course, we should be clearly aware that improving the quality of accounting personnel is a gradual process and cannot be achieved overnight.

At the same time, accountants should also actively change their own concepts. They must keep in mind their important position and major responsibilities in the development of the market economy, conscientiously study and master the new content of accounting standards, and ensure that accounting information truly and fairly reflects the financial status and operating results of enterprises. Consciously resist and prevent risks.

3.3 Seeking maximum benefits from the internationalization of my country’s accounting standards

As a big country, China will further improve and perfect its own accounting standards after joining the WTO, and will improve its social and economic environment and other aspects. Create conditions for the internationalization of accounting standards. Facing the established pattern of setting international accounting standards, we must acknowledge the reality, be good at seeking balance from imbalance, take practical and effective countermeasures with full consideration of our country’s national conditions, and do the following tasks: ① Improve my country’s accounting standards The quality of the formulation should be accelerated, and the integration with international accounting standards (mainly Anglo-American accounting standards) should be accelerated, and a conceptual framework that is not only conducive to safeguarding our country's interests, but also conducive to promoting the internationalization of accounting and recognized by the international community should be formulated as much as possible. ② Change the traditional thinking of formulating accounting standards, change the traditional concept of "doing nothing as long as it is not stipulated in laws and regulations" in the past, and avoid being at a disadvantage when Chinese companies and foreign companies apply different laws and regulations domestically. status. ③ Consciously cultivate international accounting talents and international accounting scholars, and actively strive for or create conditions to participate in international accounting affairs. And accordingly, we will promote accounting education and strengthen accounting research. ④ Build an environmental adaptation mechanism for the internationalization of accounting standards as soon as possible. Although in the process of internationalization of accounting standards, there may be situations where the gains outweigh the losses, the internationalization of accounting standards is the general trend and the trend. As long as we grasp the appropriateness, pros and cons, and rhythm, we can implement the internationalization of our country's accounting standards smoothly and effectively.

The recognition of revenue is a major problem in financial accounting. Whether and when revenue can be recognized mainly depends on the professional judgment of accountants. The formulation of new accounting standards has solved the difficulty of revenue recognition to a certain extent. However, how to better implement the spirit of the new standards is a new problem facing accountants, which must be solved by continuously improving the revenue recognition procedures and improving the professional quality of accountants.