Revenue recognition is an important issue in layaway sales. The retailer still has the risk of ownership relating to the merchandise and has only received an advance or rather a deposit from the customer and he does not have any enforceable right on the remainder of the price. Delivery of goods cannot as yet be legally enforced by the customer.

Revenue recognition has always been a tricky and complex question for both practicing accountants and standard setters. Very often, the revenue is overstated or companies tweak the revenue numbers. So recording revenue improperly can often be an "earnings management" technique as such.

In the US for example, a really comprehensive standard of revenue recognition is conspicuous by its absence. So conceptual guidelines in the Financial Accounting Standards Board's (FASB) concepts and the detailed work a day guidelines often clash. Most of the authoritative literature focuses on industry or transaction specific implementation guidelines. The US General Accounting Policies & Prescriptions (GAPP) is by and large rule-based and hence the more complex the industry, the more difficult the decision as to when revenue is to be recognized. The important clauses, i.e., the Sarbanes Oxley Act 2002, with regard to revenue is shown in box.

The Accounting World Magazine, General Accounting Policies & Prescriptions, GAPP, Financial Accounting Standards Board's, FASB, Sarbanes Oxley Act, Insurance Companies, Earnings Management, Entity Assets, Indian Accounting Standards, International Accounting Standards, Institute of Chartered Accountants of India, ICAI, Leased Assets.