Revenue recognition and the automotive industry: Shifting into a new gear

An exposure draft, Revenue from contracts with customers, was issued in June 2010 that proposes a single, contract-based asset and liability model in which revenue is recognized upon the satisfaction of performance obligations. We believe that companies will likely need to fundamentally change their approach to the revenue process, as this exposure draft represents a new way of thinking about revenue recognition. Changes resulting from the exposure draft would reach beyond financial reporting with impact to entity-wide functions (e.g., IT systems), key financial statement metrics, and legal contracts (e.g., debt covenants and contracts with customers).

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