Reference no: EM131806129

Problem

After reviewing the ten principles that are the building blocks for GAAP, I find Revenue Recognition to be the most important one of them all. Companies place a big emphasis on meeting the goals set for their fiscal year, which mean the company is being successful. It is understood that this principle allows a more accurate representation of current condition of the companies. Companies often measure their success on the amount of revenue they have been able to obtain by selling their products and/or services. If a company is able to accurately determined if it is profitable or not, it can than make decisions on how to proceed. Also, it is very helpful because this principle provides guidance of when to recognize revenue. This makes it easier for companies to follow it in order to not overstate or understate the company's lucrative success. From an employee's perspective, it is important to view this principle as key determinant of the company's owner to provide bonuses or raises. It is doubtful anyone would argue about the measure of success if the end result is a bonus.