Research On Problems Of Revenue Recognition Of Virtual Currency

In recent years, the online games have made considerable progress because of the development of the Internet. In order to facilitate the transformation between legal tender and virtual goods, online game companies create virtual currency. The features of virtual currency differ from the traditional commodities, which means different accounting treatment. However, China’s accounting standards don’t have the appropriate update. Therefore, there are a lot of problems on revenue recognition of virtual currency in practice. By contrast, the International Accounting Standards Board has updated the accounting standards to effectively guide the revenue recognition of virtual currency. In addition, Ernst & Young and Deloitte published guidelines for revenue recognition of virtual currency. To make revenue recognition of virtual currency more reasonable and comparable in online games companies of our country, I will provide some advice for online game companies in our country about the revenue recognition on the basis of foreign literature.There are problems in three areas on the revenue recognition of virtual currency in practice:(1) problems of revenue recognition of normal sales. Many companies regard virtual goods as inventories and recognize revenue when the virtual currency transforms into virtual goods;(2) problems of revenue recognition of rewarding virtual currency. Many companies do not distinguish various contracts and various performance obligations when they are recognizing the revenue of rewarding virtual currency;(3) problems of revenue recognition of long-unused virtual currency. There is part of virtual currency which the players don’t use for long periods. In fact, the long-unused virtual currency is the unexercised rights of customers, many companies don’t recognize the expected breakage amount as revenue.For the problems above, this paper proposes some suggestions:(1) revenue of normal sales is recognized with the methods of GBRM, UBRM, IBRM;(2) companies should distinguish various contracts and various performance obligations when they are recognizing the revenue of rewarding virtual currency;(3) online game companies can recognize the breakage amount as revenue when the residual rights is not likely to exercise, or they can choose the methods of revenue recognition of normal sales to recognize t he breakage amount as revenue.