Years ago, the "ka-ching" of a cash register signaled the appropriate tune to recognize revenue. With the advent of radio frequency identification (RFID) chips, revenue recognition in the future may be signaled by a "beep." RFID chips are minitransmitters that can broadcast data over a very short range, typically only a few feet. RFID chips have an advantage over bar codes, because they are less easily damaged or obscured. RFID chips have the potential to revolutionize the means by which revenue is recognized by objectively documenting the transaction that takes place downstream in the supply chain. As the use of the RFID chips become more prevalent and as the manufacturing technology matures, the cost should become far less than one cent per chip. The use of RFID chips to objectively monitor the appropriateness of a retailer's claim for markdown credit should be given serious consideration. Revenue recognition has been one of the more difficult issues faced by the accounting profession in recent years.
Revenue Recognition Revolutionized
Years ago, the "ka-ching" of a cash register signaled the appropriate time to recognize revenue. With the advent of radio frequency identification (RFID) chips, revenue recognition in the future may be signaled by a "beep."Advances in technology, such as RFID chips, were anticipated by FASB in its conceptual framework. In Statement of Financial Accounting Concepts (SFAC) 5, "Recognition and Measurement in Financial Statements of Business Enterprises," it noted: "The recognition criteria and guidance in this Statement are generally consistent with current practice and do not imply radical change. Nor do they foreclose the possibility of future changes in practice. FASB intends future change to occur in the gradual, evolutionary way that has characterized past change."FASB's view of "gradual, evolutionary" change was written at about the same time as the introduction of IBM's XT personal computer. What was viewed at that time as gradual is viewed today as snail's pace. Revenue recogn...